Access to Credit as a Growth Constraint
Access to Credit as a Growth Constraint

Summary/Abstract: From a sample of 75,854 Slovenian firms in the period 1995–2011, we examine the effects of a firm’s access to bank credit on its growth. The results suggest that as the external financing constraint relaxes and firm gets access to credit, the reliance on internal funds to finance growth decreases. By exploring the role of available collateral in gaining access to bank credit, we findthat collateral only helps larger fi rms to obtain credit more easily. On the other hand, collateral does not reduce micro firms’ dependence on internal funds to fi nance growth, which suggests that even if they have collateral, banks are still unprepared to finance them, possibly due to the level of risk. It could also be that in approving credit to micro firms, other factors such as liquidity or cash flow are more highly considered by banks than the value of collateral.

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