Who Needs Credit and Who Gets Credit? Evidence from the Surveys of Small Business Finances

57 Pages Posted: 13 May 2008 Last revised: 10 May 2016

See all articles by Rebel A. Cole

Rebel A. Cole

Florida Atlantic University

Tatyana Sokolyk

Brock University - Department of Finance, Operations & Information Systems

Date Written: February 1, 2016

Abstract

We use data from the Surveys of Small Business Finances to classify small privately held firms into four groups based upon their credit needs. Our results reveal strong and significant differences among each of these four groups of firms. Non-borrowers look very much like approved borrowers. Discouraged borrowers resemble denied borrowers in many respects, but are significantly different along a number of dimensions. Our analysis indicates that about one in three discouraged borrowers would have received credit if they had applied. Denied borrowers differ from approved borrowers across numerous characteristics, as previously documented in the literature. Of particular note, Black-owned firms were denied credit at a far higher rate than firms with owners who were white.

Keywords: availability of credit, capital structure, credit rationing, discouraged, discrimination, entrepreneurship, loan approval, loan denial, small business, SSBF

JEL Classification: G21, G32, J71, L11, M13

Suggested Citation

Cole, Rebel A. and Sokolyk, Tatyana, Who Needs Credit and Who Gets Credit? Evidence from the Surveys of Small Business Finances (February 1, 2016). Journal of Financial Stability 24, 40-60, June 2016. Available at SSRN: https://ssrn.com/abstract=1131064 or http://dx.doi.org/10.2139/ssrn.1131064

Rebel A. Cole (Contact Author)

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

Tatyana Sokolyk

Brock University - Department of Finance, Operations & Information Systems ( email )

500 Glenridge Avenue
St. Catherines, Ontario L2S 3A1
Canada

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