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The Relationship between U.K. Banks and Their Small Business Customers

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  • Binks, Martin R
  • Ennew, Christine T

Abstract

Much emphasis is placed upon the benefits to both parties of a 'good' relationship between banks and their small business customers. Having explained the significance of SMEs in the U.K. Economy, the papers goes on to consider, briefly, some of the arguments which underpin the rationale for these relationships. The roles of information and communication are discussed and the poor coordination between banks, SMEs and their accountants is highlighted. Evidence from over 6,000 small businesses in response to the Forum of Private Business survey in 1994 is then presented. This demonstrates the strong positive association between more participative relationships and more positive perceptions of their banks by firms. Finally it is suggested that a virtuous circle of information and communication could be established if the parties cooperate in a systematic process of risk assessment. Copyright 1997 by Kluwer Academic Publishers

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  • Binks, Martin R & Ennew, Christine T, 1997. "The Relationship between U.K. Banks and Their Small Business Customers," Small Business Economics, Springer, vol. 9(2), pages 167-178, April.
  • Handle: RePEc:kap:sbusec:v:9:y:1997:i:2:p:167-78
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    Cited by:

    1. Owualah, Sunday I., 2002. "SMEs, borrowing constraints and banking relationships in Japan," Japan and the World Economy, Elsevier, vol. 14(1), pages 87-100, January.
    2. Eugene Kang & Asghar Zardkoohi & Ramona Paetzold & Donald Fraser, 2013. "Relationship banking and escalating commitments to bad loans," Small Business Economics, Springer, vol. 40(4), pages 899-910, May.
    3. Mateev, Miroslav & Poutziouris, Panikkos & Ivanov, Konstantin, 2013. "On the determinants of SME capital structure in Central and Eastern Europe: A dynamic panel analysis," Research in International Business and Finance, Elsevier, vol. 27(1), pages 28-51.
    4. Mark Freel & Sara Carter & Stephen Tagg & Colin Mason, 2012. "The latent demand for bank debt: characterizing “discouraged borrowers”," Small Business Economics, Springer, vol. 38(4), pages 399-418, May.
    5. Di Giuli, Alberta & Caselli, Stefano & Gatti, Stefano, 2011. "Are small family firms financially sophisticated?," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2931-2944, November.
    6. Lehmann, Erik & Neuberger, Doris, 2001. "Do lending relationships matter?: Evidence from bank survey data in Germany," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 339-359, August.
    7. Carole Howorth & Andrea Moro, 2012. "Trustworthiness and interest rates: an empirical study of Italian SMEs," Small Business Economics, Springer, vol. 39(1), pages 161-177, July.
    8. Katrin Kull, 2005. "Theoretical and Methodological Foundations for Personality Research in the Context of Business-to-Business Relationships: the Case of Financial Services," Working Papers 135, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    9. Voordeckers, Wim & Steijvers, Tensie, 2006. "Business collateral and personal commitments in SME lending," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3067-3086, November.

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