Do guarantee banks mitigate credit restrictions for SMEs?

Anke Valentin and Thomas Henschel

International Journal of Entrepreneurship and Small Business, 2013, vol. 20, issue 4, 481-496

Abstract: German guarantee banks facilitate the access to bank finance of SMEs with no or not enough valuable collateral by underwriting a certain share of the overall risk of the loan amount. Based on conceptual studies about credit guarantee schemes a unique research approach has been developed to evaluate whether guarantee banks also help to overcome problems of asymmetric information and support the creation of lending relationships. Research findings to date have confirmed the positive impact of guarantee banks on SME lending. By facilitating the granting of loans to SMEs by commercial banks, guarantee banks indeed contribute to a reduction of information asymmetries which is often referred to as a main reason for credit constraints and help to intensify the relationship between banks and borrowers. The findings also provided some indications for a sustainable mitigation of credit constraints for SMEs seeking to borrow funds.

Keywords: credit guarantee schemes; guarantee banks; SME lending; SME finance; information asymmetries; asymmetric information; lending relationships; credit restrictions; small businesses; Germany; small firms; entrepreneurship; access to finance; bank finance; entrepreneurial finance; SMEs; small and medium-sized enterprises; loan guarantees; credit constraints. (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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