Only the brave: improving self-rationing efficiency among discouraged Swiss SMEs

Abstract We conduct a survey among 1922 Swiss SMEs to analyze their access bank loans. Credit-constrained are six times more likely be discouraged than rejected. The most dominant reasons for being too high collateral requirements, cumbersome application procedure, and the expectation of turned down. Through unique feature in banking market, we also find new evidence importance strong firm–bank relationship. challenge assumption that borrowers very similar rejected borrowers. Our results indicate group is denied approved borrowers, but only with respect firm characteristics. For variables describing business development relationship, have less common credit-constrained firms unconstrained counterparts. Even conservative prediction, about 60% would obtained loan if they had applied one. self-rationing mechanism observed thus rather inefficient, banks policy makers should think how foster SMEs’ courage apply loans need.