ABSTRACT

This chapter describes and analyzes loan officers' assessments of loan applications from SMEs, to explore how external and internal factors could affect these assessments and to provide insight into and additional knowledge of SME lending in times of turbulence. Although SMEs are important for job creation and regional growth because they can quickly respond to changes in the economy, most SMEs encounter barriers to growth. The literature review suggests that the recent financial crisis has tightened bank regulation. The chapter reports part of the results of a research program on SME loan assessments conducted at the Center for Research on Economic Relations at Mid Sweden University. Part of the bank's strategy was that its loan officers should focus extensively on future repayment ability when assessing SME loan applications, that is, a shift from historical to future-oriented information-based assessments. It was also emphasized that the bank preferred borrowers who conducted most of their financial affairs at the bank—in the bank's terminology.