Personal Guarantees, Loan Pricing and Lending Structure in Finnish Small Business Loans
University of Oulu - Department of Accounting and Finance
Markku J. Vieru
University of Lapland - Faculty of Social Sciences
June 15, 2011
Journal of Small Business Management (JSBM), Forthcoming
This study analyzes the role of personal guarantees and collateral in the context of two different lending structures, one transaction - and the other relationship-based. The Finnish bank data which were uniquely accessible for the study enabled an exploration of credit files with specific details of the characteristics of the lending relationship during the period 1995-2001. According to the empirical results, the use of personal guarantees is an indication of transactional-based lending. Personal guarantees seem to increase the loan premium in transactional-based loans more than in relationship-based loans. Close ties between a bank and a firm seem to be a desirable basis for SME bank lending.
Number of Pages in PDF File: 40
Keywords: personal guarantee, collateral, relationship banking, loan pricing, small business bank lending
JEL Classification: G21, M14, M21Accepted Paper Series
Date posted: June 16, 2012
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