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

ABSTRACT

This qualitative study sets out to determine from the perspective of bankers the factors that affect SME access to bank loans. Semi-structured interviews were conducted with 25 Turkish bank managers, and thematic analysis was used to analyse the interviews. The results revealed that the commitment of an SME to its credit obligations, combined with its financial data, affects its access to bank loans. Banks evaluate the adequacy of equity for the area of activity, the profitability of the firm, its debt ratio and current ratio, and the firm’s ability to generate sufficient cash flow. Other factors that affect access to bank loans include the length of the firm’s relationship with the bank, the industry in which the firm operates, the age of the firm and impressions gained from on-site visits. Firms that have a long-term relationship with the bank and older firms have better access to bank loans. Moreover, manufacturing sector SMEs have easier bank financing accessibility.

KEYWORDS:

• SMEs
• SME financing
• bank loans
• banks
• financial constraints
• emerging markets

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Dr. Aysa Ipek Erdogan is an Associate Professor of Finance at the Department of Tourism Administration, Bogazici University, where she has taught for the past five years. She is also the Vice Chair of the Department of Tourism Administration. Dr. Erdogan holds a PhD in management (finance specialization) and an MBA from Bogazici University. She has taught accounting and finance courses in several universities since 2010. Her research interests include small business finance and corporate finance.

ORCID

Aysa Ipek Erdogan http://orcid.org/0000-0002-8653-9271

Notes

1 Foreign-owned banks are banks where more than 50% of the equity is held by non-domestic investors.

2 According to Banking Regulation and Supervision Agency, SMEs are firms which employ less than 250 people, and which have an annual turnover not exceeding 125 million Turkish Liras.

3 Although it is not an obligation, Turkish companies may prefer to provide meals for their employees in the work premises.

Additional information

Funding

This work was supported by Bogazici University Scientific Research Projects Fund [grant number 7945].