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The Role of Mutual Guarantee Institutions in the Financial Sustainability of New Family-Owned Small Businesses

Concepción de la Fuente-Cabrero (), Mónica de Castro-Pardo (), Rosa Santero () and Pilar Laguna-Sánchez ()
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Concepción de la Fuente-Cabrero: Faculty of Law and Social Sciences, University Rey Juan Carlos, 28032 Madrid, Spain
Mónica de Castro-Pardo: Faculty of Law and Social Sciences, University Rey Juan Carlos, 28032 Madrid, Spain
Pilar Laguna-Sánchez: Faculty of Law and Social Sciences, University Rey Juan Carlos, 28032 Madrid, Spain

Sustainability, 2019, vol. 11, issue 22, 1-15

Abstract: Small family-owned companies are the most common type of European business structure and are characterised by their orientation to long-term goals. Therefore, they can play an important role in the launching of businesses related to sustainable growth. However, access to finance is difficult for start-ups. Mutual Guarantee Institutions (MGIs) mitigate this problem by facilitating long-term guaranteed loans, but they must assume responsibility for default losses. This paper analyses, as of the end of 2018, the loan default of the portfolio of guarantees formalised by Spanish MGIs with new companies between 2003 and 2012, a period including both economic growth and recession. The objective is to identify the annual evolution and the average global cost of default, as well as the differences in said portfolios according to the purpose of the loan, company size and economic activity. The analysis was developed while considering two scenarios: one determinist, using a ratio method and another stochastic, using an analysis of variance. We found differences in the distribution of defaults for the variables company size and sector of activity. The findings provide relevant information for managers and Public Administrations to improve the distribution of guarantees between Spanish MGIs and public institutions, and their coverage of Small and Medium Enterprise (SME) loan defaults.

Keywords: family new businesses; financial sustainability; access to finance; Mutual Guarantee Institutions; loan default (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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