Business, Management and Accounting
8 years ago

Bank-SME relationships drive up loan rates for small businesses.

Jingji wenti
The Impact on Interest Rate of Manufacturing SMEs Lending by the Relationship between Banks and SMEs: Evidences from Xuzhou and Liuzhou
Yan Bai-lu

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The relationship between banks and small manufacturing businesses affects the interest rates on loans. When banks have a long history of working with a business and provide a large portion of its funding, they tend to charge higher interest rates. On the other hand, when businesses have multiple sources of financing, banks may also charge higher rates. The depth of the relationship, measured by years of cooperation and loan proportions, leads to higher rates, while the breadth of the relationship, measured by other business interactions, leads to lower rates.