Factors affecting SME access to bank financing: an interview study with Turkish bankers

Erdogan, Aysa Ipek

doi:10.1080/13215906.2018.1428911

Cited by 49 publications

(37 citation statements)

References 42 publications

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“…The reason for this is that, from the financial perspective, SMEs can be considered a special segment of business that are particularly sensitive to economic downturns or face more obstacles over the course of their growth. Much academic attention has been dedicated to estimating the financial constraints of firms in recent years (see, for example, Ullah, 2019;Erdogan, 2018;McGuinness et al, 2018). Erdogan (2018) showed that firms with high growth potential may have to rely on limited internal funds, which in turn constrains their ability to make investments, with such obstacles having adverse effects on the growth of SMEs as a consequence.…”

Section: An Overview Of Distress Predictorsmentioning

confidence: 99%

“…Much academic attention has been dedicated to estimating the financial constraints of firms in recent years (see, for example, Ullah, 2019;Erdogan, 2018;McGuinness et al, 2018). Erdogan (2018) showed that firms with high growth potential may have to rely on limited internal funds, which in turn constrains their ability to make investments, with such obstacles having adverse effects on the growth of SMEs as a consequence. McGuinness et al (2018) examine whether trade credit has helped financially constrained SMEs survive the recent financial crisis, while highlighting SMEs' dependency on bank finance and their vulnerability to financing constraints.…”

Section: An Overview Of Distress Predictorsmentioning

confidence: 99%

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Cash Flows Indicators in the Prediction of Financial Distress

Karas

Režňáková

2020

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We argue that the conventional approach to bankruptcy modelling, which relies on accrual-based ratios, is vulnerable to the earnings management of a company threatened by insolvency. This fact may pose significant limits on the possibilities of distress prediction. Business distress is defined as cashflow insufficiency, and cashflow indicators are less vulnerable to earnings management. For these reasons we assume that cashflow ratios are theoretically more suitable for predicting distress. In our research we analysed the usefulness of cashflow-based ratios as potential predictors of bankruptcy. During the research, the cashflow-based ratios take the form of many variants of operating, financial, investment and free cashflow into a firm in combination with total assets, sales, liabilities and other indicators. The research was carried out on a sample of 4,350 Czech manufacturing SMEs operating during the period between 2013 and 2018. We employ the previously published approach of hybrid modelling to create the prediction model, though we propose a modification for the purposes of this paper. The modified hybrid model employs Classification and Regression Trees and Logistic Regression, while we use the Principal Component Analysis method to deal with the problem of multicollinearity. The results showed that operating cashflow ratios play a significant role in financial distress, especially when combined with short-term debts.

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Section: An Overview Of Distress Predictorsmentioning

confidence: 99%

Section: An Overview Of Distress Predictorsmentioning

confidence: 99%

Cash Flows Indicators in the Prediction of Financial Distress

Karas

Režňáková

2020

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“…They conclude that it is less risky for banks to provide credit to SMEs and retail than to corporations. (Erdogan, 2018) uses a qualitative method to examine the factors that influence SMEs' access to financing through bank loans from Turkish banks. The study concludes that several factors influence the level of SMEs' access to financial resources, such as real financial information, adequate working capital and revenue generation.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Further, SMEs lack skilled management, technology, and employees with training and experience, limitations that reflect on their continuity, innovation, and growth. On the one hand, the above factors stand as barriers to the access of the financial sources that are necessary to the continuity and growth of SMEs, (Erdogan, 2018). On the other hand, banks consider SMEs as sources of financial risk.…”

Section: Introductionmentioning

confidence: 99%

The causal relationship between SME sustainability and banks’ risk

Shihadeh

Gamage

Hannoon

2019

Economic Research-Ekonomska Istraživanja

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This study aims to examine the influence of banks' credit to SMEs on non-performing loans. Many studies find that access to financial sources has become an obstacle to the growth and sustainability of SMEs. This study uses theoretical and empirical approaches to support the study's hypothesis. Data are presented for 15 banks in Palestine, covering the period 2006 to 2016.The study uses empirical techniques regarding to examine the relationship between the variables. Evidence shows that encouraging banks to lend more money to SMEs through the use of a guarantee fund could decrease their risk. Thus, enhancing credit to SMEs could improve the growth and sustainability of these firms. The study recommending policymakers and bank's managers could develop their strategies according to SME's needing. Therefore, enhancing the growth in these firms and reducing the bank's risk. Furthermore, adopting the guarantee funds in developing countries could decrease the bank's risk, thus lending more to SME. The value of this paper comes from the importance of SME in the economic growth and development sustainability. Therefore, there is a need to convince banks to enhance SME credit through a guarantee fund and that extending this type of credit would positively influence banks' activities.

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“…On the other hand, the main problem for Turkish SMEs that do operate in the formal system is the unwillingness of banks to extend long-term loans that match the investment cycle (Keay, 2016). Erdogan (2018) provides evidence that banks are hesitant to lend to SMEs in Turkey because of the information asymmetry caused by inadequate financial records and business plans. The study shows that because the actual financial situation of most SMEs is not reflected in their financial statements, banks find it difficult to assess their creditworthiness by analysing SMEs quantitatively.…”

Section: Introductionmentioning

confidence: 99%

Determinants of perceived bank financing accessibility for SMEs: evidence from an emerging market

Erdogan

2019

Economic Research-Ekonomska Istraživanja

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To contribute to the small and medium-sized enterprises (SMEs) financing literature, this paper uses a unique sample of 492 Turkish SMEs to analyse the firm-level determinants of SME perceptions of bank financing accessibility. Logistic regression results reveal that older and relatively more innovative firms are more positive about their ability to secure bank loans, as are SMEs that have longer relationships with their oldest banks. Firms with two owners are more inclined than firms with a single owner and firms with three or more owners to perceive accessing bank loans as easy. This finding signals that although bank loan applications of firms with two owners have higher credibility than those of firms with a single owner, having more than two owners creates more complex agency problems for banks. Compared with firms incurring a loss, firms that make a profit or break even perceive it to be easier to obtain bank financing. SMEs in the service industry are more positive about accessing bank loans than are firms in manufacturing and other industries.

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Factors affecting SME access to bank financing: an interview study with Turkish bankers

Cited by 49 publications

References 42 publications

Cash Flows Indicators in the Prediction of Financial Distress

Cash Flows Indicators in the Prediction of Financial Distress

The causal relationship between SME sustainability and banks’ risk

Determinants of perceived bank financing accessibility for SMEs: evidence from an emerging market

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