Personal Guarantees, Loan Pricing and Lending Structure in Finnish Small Business Loans

Journal of Small Business Management (JSBM), Forthcoming

40 Pages Posted: 16 Jun 2012

See all articles by Janne Peltoniemi

Janne Peltoniemi

University of Oulu - Department of Economics, Accounting and Finance

Markku J. Vieru

University of Lapland - Faculty of Social Sciences, Multidimensional Tourism Institute

Date Written: June 15, 2011

Abstract

This study analyzes the role of personal guarantees and collateral in the context of two different lending structures, one transaction - and the other relationship-based. The Finnish bank data which were uniquely accessible for the study enabled an exploration of credit files with specific details of the characteristics of the lending relationship during the period 1995-2001. According to the empirical results, the use of personal guarantees is an indication of transactional-based lending. Personal guarantees seem to increase the loan premium in transactional-based loans more than in relationship-based loans. Close ties between a bank and a firm seem to be a desirable basis for SME bank lending.

Keywords: personal guarantee, collateral, relationship banking, loan pricing, small business bank lending

JEL Classification: G21, M14, M21

Suggested Citation

Peltoniemi, Janne and Vieru, Markku, Personal Guarantees, Loan Pricing and Lending Structure in Finnish Small Business Loans (June 15, 2011). Journal of Small Business Management (JSBM), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2084154

Janne Peltoniemi (Contact Author)

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014
Finland

Markku Vieru

University of Lapland - Faculty of Social Sciences, Multidimensional Tourism Institute ( email )

P.O. Box 122
Rovaniemi FIN-96101
Finland
+358 400 377641 (Phone)
+358 16 341 2600 (Fax)

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