UK credit and discouragement during the GFC

Marc Cowling, Weixi Liu, Maria Minniti, Ning Zhang

Research output: Contribution to journalArticlepeer-review

57 Scopus citations


The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions, most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses is that who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7 % of the total smaller business population. Further analysis implies that 55.6 % of discouraged borrowers would have got loans had they applied.

Original languageEnglish (US)
Pages (from-to)1049-1074
Number of pages26
JournalSmall Business Economics
Issue number4
StatePublished - Dec 1 2016


  • Bank lending
  • Credit discouragement
  • Credit rationing
  • Small business finance

ASJC Scopus subject areas

  • General Business, Management and Accounting
  • Economics and Econometrics


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