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The individual bank officer's lending assessment of small businesses: a comparative study in Sweden and the United Kingdom
Halmstad University, School of Business and Engineering (SET).
Halmstad University, School of Business and Engineering (SET).
2005 (English)Independent thesis Basic level (degree of Bachelor)Student thesis
Abstract [en]
The importance of small businesses as a source of growth and employment on the market is shown in both Sweden and the UK. Financing to small businesses to make them grow is a big issue and the bank is the primary source of debt finance in both countries. When the bank is financing small businesses it puts itself at risk mostly because an information asymmetry between the bank and the small business is believed to exist. In order to prevent this from happening, and to protect the bank, every application goes through a credit process. During this process information requirements are set by the bank and information is gathered and evaluated by the bank officer to grant/reject the loan application. These information requirements are of quantitative character considering for example the person, the business idea and collateral as well as qualitative factors influencing the assessment that could consist of a well developed relationship between the business and the bank, a network of contacts and the local office. Because of the importance of these requirements and their effect on a fair credit process we wanted to study what information that is requested by the local bank officer since this is where small businesses turn. Also we wanted to explore a new area and found that a comparison between the Continental Sweden and the Anglo-Saxon UK with their different capital structure could show interesting similarities/differences for further understanding and exchange of knowledge of credit processing. The study was conducted among local branches of four major commercial banks in Sweden and UK: Föreningssparbanken (SWE), Skandinaviska Enskilda Banken (SWE), Barclays (UK) and Lloyds TSB (UK). We interviewed eight local bank officers working with small business lending. The results of the study show that the information requirements are in general a lot alike in the studied countries but differ on some major points as well. The emphasis is experienced to be put on the existence of financial figures for granting/rejection but all variables must be assessed in order to give a correct decision. The overall view of financing to small businesses has proven to be similar in both countries when emphasising the importance of small businesses as a source of revenue. However the view of the bank itself on the market as well as the sort and amount of collateral differs. In Sweden the small businesses are more seen as customers while in the UK a partnership is experienced. The collateral in Sweden consists of real estate and personal guarantee while in UK collateral is given less importance for the benefit of own stake to put in. The differences and similarities found can be explained by things like country legislation, the impact of theory of finance, the structure of the capital market and the experience of the bank officer
Place, publisher, year, edition, pages
2005.
Keyword [en]
Små företag, ekonomi, bank finansiering, kreditbedömning, kredit process, credit process, lending assessment, bank financing, small businesses
Identifiers
URN: urn:nbn:se:hh:diva-12979Local ID: U12049OAI: oai:DiVA.org:hh-12979DiVA: diva2:368148
Uppsok
Social and Behavioural Science, Law
Note
Denna uppsats kan beställas från arkivet / This paper can be ordered from the archive. Kontakta / Contact: arkivet@hh.seAvailable from: 2010-11-09 Created: 2010-11-09Bibliographically approved

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