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Do SMEs in deprived areas find it harder to access finance? Evidence from the UK Small Business Survey

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  • Neil Lee
  • Emma Drever

Abstract

Encouraging enterprise in deprived places is an important objective of the UK government policy. Evidence on the perceptions of entrepreneurs suggests that access to finance may be harder for firms in deprived areas, who may have fewer contacts, less collateral or worse access to mainstream banks. Yet there is little empirical evidence on whether this is actually the case. This paper investigates whether firms in deprived areas are more likely to find it hard to access finance than other firms, using a sample of around 3500 UK small and medium sized enterprises (SMEs). We find that firms in deprived areas are more likely to perceive access to finance is a problem. However, controlling for SME characteristics, firm growth, credit scores and selection effects, we find no evidence that they actually do find it harder to obtain. The results suggest that geographical disparities in access to finance are unimportant for the average firm.

Suggested Citation

  • Neil Lee & Emma Drever, 2014. "Do SMEs in deprived areas find it harder to access finance? Evidence from the UK Small Business Survey," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 26(3-4), pages 337-356, May.
    • Handle: RePEc:taf:entreg:v:26:y:2014:i:3-4:p:337-356
    DOI: 10.1080/08985626.2014.911966
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    Cited by:

    1. Ghadiri, Mohaddese & Sarrafi, Mozaffar, 2022. "Integrating support groups, an effective approach to regenerate historic neighborhoods of Iran Case study: Oudlajan Neighborhood, Tehran," Land Use Policy, Elsevier, vol. 112(C).
    2. Lee, Neil & Brown, Ross, 2016. "Innovation, SMEs and the liability of distance: the demand and supply of bank funding in peripheral UK regions," LSE Research Online Documents on Economics 66215, London School of Economics and Political Science, LSE Library.
    3. Martin Andersson & Johan E. Eklund & Alexandra Tsvetkova, 2023. "Spatial variations in financial constraints of SMEs—evidence from firm-level estimates of investment-cash flow sensitivities in Sweden," Small Business Economics, Springer, vol. 60(4), pages 1683-1698, April.
    4. Monika Klein & Piotr Gutowski & Laima Gerlitz & Ewelina Gutowska, 2021. "Creative and Culture Industry in Baltic Sea Region Condition and Future," Sustainability, MDPI, vol. 13(8), pages 1-17, April.
    5. Lee, Neil & Sameen, Hiba & Cowling, Marc, 2015. "Access to finance for innovative SMEs since the financial crisis," Research Policy, Elsevier, vol. 44(2), pages 370-380.
    6. Amarjit Gill & Craig Wilson, 2021. "Bank connections and small business performance: Evidence from Canadian survey data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5110-5134, October.

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