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Factors Influencing Take-Up Rates on the Loan Guarantee Scheme

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  • Cowling, Marc
  • Clay, Nick

Abstract

This paper uses time-series analysis to model explicitly the take-up rate of the UK Government's Loan Guarantee Scheme over the 1980s. In doing so we consider the rationale for the scheme in the context of empirical and theoretical research into the financing of small businesses and in particular the nature of the small firm/bank relationship. To begin we discuss the history and evolution of the scheme from its inception in 1981. A theoretical model is then outlined in which LGS funds are used to maximize the utility of capital constrained entrepreneurs. Using this framework we find that the UK Government can do much to influence the levels of both take-ups and failures of firms on the scheme by directly altering the parameters. The scheme's apparent success as a [relatively] cost-effective job generation package suggests more could be done to extend the scheme to aid more start-up firms and those existing firms wishing to expand. Copyright 1995 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 7 (1995)
Issue (Month): 2 (April)
Pages: 141-52

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Handle: RePEc:kap:sbusec:v:7:y:1995:i:2:p:141-52

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Web page: http://www.springerlink.com/link.asp?id=100338

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Cited by:
  1. Sourafel Girma & Holger Görg & Aoife Hanley & Eric Strobl, 2010. "The effect of grant receipt on start-up size: Evidence from plant level data," Kiel Working Papers 1607, Kiel Institute for the World Economy.
  2. Chau-Jung Kuo & Chin-Ming Chen & Chao-Hsien Sung, 2011. "Evaluating guarantee fees for loans to small and medium-sized enterprises," Small Business Economics, Springer, Springer, vol. 37(2), pages 205-218, September.

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