Advertisement

SME Financing and the Financial Crisis: A Framework and Some Issues

  • Gregory F. Udell
Chapter
Part of the Contributions to Economics book series (CE)

Abstract

Studies of net job creation generally confirm the importance of the SME sector as an engine that can drive the economy out of a recession. The SME sector cannot perform this role without access to external finance. This article examines new paradigms that have expanded our understanding of how SME loans are underwritten and how underwriting changes during a macro financial shock. We also use these paradigms to examine two interesting issues related to SME financing during the current financial crisis: the behavior of foreign-owned banks particularly in developing economies and the efficacy of government guarantee programs.

Keywords

Financial Crisis Trade Credit Real Estate Market Saving Bank Small Bank 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. Alessandrini P, Andrea FP, Alberto Z (2009) Banks, distances and firms’ financing constraints. Rev Finance, 13:261–307Google Scholar
  2. Bakker MHR, Klapper L, Udell GF (2004) Financing small and medium-size enterprises with factoring: global growth and its potential in eastern europe. World Bank Monograph, Washington, DC. http://wbln0018.worldbank.org/html/FinancialSectorWeb.nsf/(attachmentweb)/3342/$FILE/3342.pdf Google Scholar
  3. Berger N, Black L (2008) Bank size, lending technologies, and small business finance. Federal Reserve Board working paperGoogle Scholar
  4. Berger AN, Miller NH, Petersen MA, Rajan RG, Stein JC (2005) Does function follow organizational form? Evidence from the lending practices of large and small banks. J Financ Econ 76:237–269CrossRefGoogle Scholar
  5. Berger AN, Udell G (1995) Relationship lending and lines of credit in small firm finance. J Bus 68:351–381Google Scholar
  6. Berger AN, Udell GF (2006) A more complete conceptual framework for SME finance. J Banking and Finance 30:2945–2966CrossRefGoogle Scholar
  7. Boyd J, Prescott EC (1986) Financial intermediary-coalitions, JEcon Ther 38:211–232Google Scholar
  8. Calomiris C, Himmelberg C, Wachtel P (1995) Commercial paper, corporate finance and the business cycle: a microeconomic perspective. Carnegie-Rochester Conf Series Public Pol 42:203–250CrossRefGoogle Scholar
  9. Carbo-Valverde S, Rodriguez-Fernandez F, Udell GF (2009) Bank lending, financing constraints and SME Investment. Working PaperGoogle Scholar
  10. Cole RA (1998) The importance of relationships to the availability of credit. J Bank Finan 22: 959–977CrossRefGoogle Scholar
  11. Craig BR, Jackson W, III, Thomson JB (2005) SBA-loan guarantees and local economic growth. Federal Reserve Bank of Cleveland working paper 05–03Google Scholar
  12. Cressy R (2002) Introduction: funding gaps. Econ J 112:1–16CrossRefGoogle Scholar
  13. de la Torre A, Martínez Pería MS, Schmukler SL (2010) Bank involvement with SMEs: beyond relationship lending. J Bank Finance 34: 2280–2293Google Scholar
  14. Diamond DW (1984) Financial intermediation and delegated monitoring, Rev EconStud 51: 393–414Google Scholar
  15. Elsas R, Krahnen, J (1998) Is relationship lending special? Evidence from credit-filling data in Germany. J Bank Finan 22:1283–1316CrossRefGoogle Scholar
  16. Hancock D, Peek J, Wilcox JA (2007) The repercussions on small banks and small businesses of procyclical bank capital and countercyclical loan guarantees. Federal Reserve Board working paperGoogle Scholar
  17. Harhoff D, Körting, T (1998) Lending relationships in Germany: empirical results from survey data. J Bank Finan 22:1317–1354CrossRefGoogle Scholar
  18. Kano M, Uchida H, Udell GF, WatanabeW (2010) Information verifiability, bank organization, bank competition and bank-borrower relationships. J Bank Finan (forthcoming)Google Scholar
  19. Klapper L (2006) The role of factoring for financing small and medium enterprises. J Bank Finan 30:3111–3130CrossRefGoogle Scholar
  20. Lummer SL, McConnell JJ (1989) Further evidence on the bank lending process and the capital market response to bank loan agreements. J Finan Econ 25:99–122CrossRefGoogle Scholar
  21. Munoz MI, Norden L, Udell, FG (2009) Liberalization, corporate governance, and savings banks. Working paperGoogle Scholar
  22. Petersen MA, Rajan RG (1994) The benefits of firm-creditor relationships: evidence from small business data. J Finan 49:3–37CrossRefGoogle Scholar
  23. Petersen MA, Rajan RG (1995) The effect of credit market competition on lending relationships. Q J Econ 110:407–443CrossRefGoogle Scholar
  24. Popov A, Udell.GF (2010) Cross-Border banking and the international transmission of financial distress during the financial crisis of 2007–2008. Working PaperGoogle Scholar
  25. Stangler D, LitanRE (2009) Where will the jobs come from? Kaufman Foundation Research Series: Firm Formation and Economic GrowthGoogle Scholar
  26. Stein JC (2002) Information production and capital allocation: decentralized versus hierarchical firms. J Finan LVII:1891–1921CrossRefGoogle Scholar
  27. Taketa K, Udell GF (2006) Lending channels and financial shocks: the case of SME trade credit and the Japanese banking crisis. Monet Econ Stud 25:1–44Google Scholar
  28. Uchida H, Udell GF, Yamori N (2008) How do Japanese banks discipline small and medium-sized borrowers? An investigation of the deployment of lending technologies. Int Finan Rev 9:57–80Google Scholar
  29. Udell GF (2004) Asset-based finance. The Commercial Finance association, New York, NYGoogle Scholar
  30. Udell GF (2008) What’s in a relationship: the case of commercial lending. Bus Horiz 93–103Google Scholar
  31. Udell GF (2009a) Wall street, main street, and a credit crunch: thoughts on the current finiancial crisis. Bus Horiz 52:117–125Google Scholar
  32. Udell GF (2009b) How will a credit crunch affect small business finance? FRBSF Econ Lett 2009–09: March 6Google Scholar
  33. Uesugi I, Sakai K, Yamashiro GM (2006) Effectiveness of credit guarantees in the Japaneses loan market. RIETI discussion paper series 06-E-004Google Scholar
  34. Wilcox JA, YasudaY (2008) Do government loan guarantees lower or raise, banks’ non-guanranteed lending? Evidence from Japanese Banks. Working PaperGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  1. 1.Chase Chair of Banking and Finance, Kelly School of BusinessIndiana University at BloomingtonBloomingtonUSA

Personalised recommendations