Finance Companies and Small Business Borrowers: An Empirical Investigation

George Haynes and Myles Watts
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George Haynes: Montana State University
Myles Watts: Montana State University

Journal of Entrepreneurial Finance, 1996, vol. 5, issue 1, 17-42

Abstract: Finance companies have been perceived as isolated and insignificant lenders, attracting high risk borrowers and charging these borrowers relatively high prices. Using the 1988 National Survey of Small Business Finance, this study examines the relationship between finance companies and other lenders, describes the characteristics of borrowers attracted to finance companies and assesses whether finance companies charge higher loan prices and impose more stringent collateral requirements on their borrowers than other lenders. This study refutes the popular notion that finance companies are not mainstream lenders by suggesting that finance companies are an important source of financial capital attracting borrowers similar to those attracted by commercial banks and charging these borrowers competitive prices.

Keywords: Finance Companies; Small Business; Lending; Borrowing (search for similar items in EconPapers)
JEL-codes: G21 G32 L25 (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:pep:journl:v:5:y:1996:i:1:p:17-42

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