Credit Rationing in the Corporate Bank Loan Market: Short Term vs. Long Term Bank Debt Rationing

Abstract

We investigate the empirical significance of credit rationing for SMEs over the period 1994-2001 using a panel data set consisting of 1,000 Belgian SMEs. We estimate a demand-supply disequilibrium model and are the first to differentiate between short and long term bank debt rationing. Our results indicate that 30.6% of the SMEs are credit rationed for long term debt. In general, these firms could be characterized as fast-growing firms, experiencing a growth delay in the aftermath of credit rationing. Only 7.8% of the SMEs would experience short term bank debt rationing, being less creditworthy firms, creating little value and cash flow.