Do SMEs in deprived areas find it harder to access finance? Evidence from the UK Small Business Survey

Neil Lee and Emma Drever

Entrepreneurship & Regional Development, 2014, vol. 26, issue 3-4, 337-356

Abstract: Encouraging enterprise in deprived places is an important objective of the UK government policy. Evidence on the perceptions of entrepreneurs suggests that access to finance may be harder for firms in deprived areas, who may have fewer contacts, less collateral or worse access to mainstream banks. Yet there is little empirical evidence on whether this is actually the case. This paper investigates whether firms in deprived areas are more likely to find it hard to access finance than other firms, using a sample of around 3500 UK small and medium sized enterprises (SMEs). We find that firms in deprived areas are more likely to perceive access to finance is a problem. However, controlling for SME characteristics, firm growth, credit scores and selection effects, we find no evidence that they actually do find it harder to obtain. The results suggest that geographical disparities in access to finance are unimportant for the average firm.

Date: 2014
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Citations: View citations in EconPapers (8)

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DOI: 10.1080/08985626.2014.911966

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