Barriers faced by SMEs in raising bank finance

Irwin, D. and Scott, Jonathan (2010) Barriers faced by SMEs in raising bank finance. International Journal of Entrepreneurial Behaviour & Research, 16 (3). pp. 245-259. ISSN 1355-2554

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– The purpose of this paper is to use univariate statistical analysis to investigate barriers to raising bank finance faced by UK small and medium‐sized enterprises (SMEs), specifically the impact of personal characteristics (ethnicity, gender and education).

– A conceptual model was developed and the results of a telephone survey of 400 SMEs conducted (before the “credit crunch”) by the Barclays Bank small business research team were analysed. The survey was based on a large stratified random sample drawn from the Bank's entire SME population.

– It was found that education made little difference to sources of finance, except that those educated to A‐level more frequently used friends and family and remortgaged their homes. However, graduates had the least difficulties raising finance. Though statistically insignificant, women respondents found it easier to raise finance than men. The survey confirmed that – and this finding was statistically significant – ethnic minority businesses, particularly black owner‐managers, had the greatest problem raising finance and hence relied upon “bootstrapping” as a financing strategy.

Practical implications
– The study makes an important contribution to filling a research gap, given the critical need of policy‐makers to understand differentials between different types of owner‐managers. It brings new insights into its field – access to finance – and with respect, especially, to marginalised groups.

– The paper adopts a different approach than many prior studies, with a large sample and robust analysis, to explore a critical need‐to‐know area in a new way – both for policy‐makers and academics in the field of SME finance.

Item Type: Article
Subjects: N100 Business studies
N300 Finance
Department: Faculties > Business and Law > Newcastle Business School
Depositing User: Becky Skoyles
Date Deposited: 07 Mar 2017 10:51
Last Modified: 31 Jul 2021 21:05

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