Has previous loan rejection scarred firms from applying for loans during Covid-19?

ABSTRACT:

Abstract

The concept of the 'discouraged' borrower is well documented. In this paper, we consider whether smaller firms in the UK who have been previously rejected for bank loans have been scarred by the experience so badly that even in the presence of two exceptionally generous Covid-19 loan guarantee schemes, they still refuse to make an application. Furthermore, we also consider what happens when they do. As banks have either zero or minimal loss exposure, do they still maintain their normal strict lending protocols or do they relax their standards to fulfil the governments' objective of supporting struggling businesses through the crisis? Our findings show that 72% of previously rejected borrowers are reluctant to request loans. We find some evidence that previously scarred fir

SUBMITTER: Cowling M 

PROVIDER: S-EPMC8683813 | biostudies-literature | 2022

REPOSITORIES: biostudies-literature