Bank financing for SMEs in times of crisis: when “whatever-it-takes” confronts “black swans”

This paper analyzes bank financing for small and medium-sized enterprises (SMEs) in an unprecedented context marked by the convergence of the unique challenges posed by the COVID-19 crisis and unconventional monetary policy (UMP). It takes a comprehensive approach by conducting both cross-country and single-country analyses to provide a nuanced understanding and broad insights into SME finance in times of crisis. The main findings of the two-dimensional analyses are as follows. First, COVID-19 has a significant negative impact on SMEs’ access to bank finance, exceeding the magnitude of the 2008–2009 global financial crisis (GFC). Second, central bank asset purchases implemented during COVID-19 mitigate this negative effect, surpassing their impact during the GFC. Moreover, the combination of central bank asset purchases with government interventions further improved SMEs’ access to bank finance. In addition, the effect of negative interest rate policy (NIRP) in increasing bank financing for SMEs is likely to be relatively limited. Furthermore, the negative impact of COVID-19 and the positive impact of central bank asset purchases are more pronounced in the manufacturing sector than in the non-manufacturing sector, suggesting sectoral heterogeneity in SME finance and the transmission of UMP. This paper has important implications for strengthening the financial resilience and sustainability of SMEs in future crises.