The influence of banking relationships on Portuguese SMEs' access to financing

A study conducted at ISEG - Lisbon School of Economics and Management of the University of Lisbon by Raquel Marques shows evidence regarding the relevance of relationships created with banks as a facilitating element for SMEs' access to credit.

Portuguese SME leaders, to positively benefit from their existing relationship with financial institutions, should maintain a lasting connection with several creditor banks, choosing banks with quick response capabilities and a variety of products, regardless of physical distance or the segmentation presented for supporting small and medium-sized enterprises.

This is the conclusion of Raquel Marques, in a study carried out in 2016 within the scope of the Master's in Economic Sciences at ISEG - Lisbon School of Economics and Management of the University of Lisbon.

Raquel Marques conducted an exploratory study on a sample of 65 Portuguese small and medium-sized enterprises, 43 of which were PME Líder. The study was based on a survey, with the aim of evaluating and understanding the levels of acceptance regarding bank financing requests and how the Bank-SME relationship influences this bank financing.

The academic work reveals that some characteristics influence the relationship and, in turn, credit analysis, such as: “company quality (ISO certifications), information asymmetry, and owner experience.”.

The results also suggest that “it is important to make banks aware of entrepreneurs' successful experiences as this increases their reputation and facilitates the acceptance of financing requests.”.

A wide range of customer services can facilitate the defense of a credit proposal and even lead to a reduction in interest rates. The author of the work advises that “the SME manager should choose to maintain a range of products with financing banks that allows increasing customer loyalty and profitability, potentially benefiting from a reduction in financing interest rates.”

In summary, it is understood through the study that SME leadership should make an effort to maintain good banking relationships with multiple banks, because despite these relationships not always increasing the acceptance or amount of financing, they allow for risk sharing and a reduction in charged interest rates. Furthermore, they enable the choice of the bank they wish to work with and increase their negotiating power.

Dissertation published in 2016, authored by Raquel Cupertino Cardoso Marques, within the scope of the Master's in Business Sciences, at ISEG - Lisbon School of Economics and Management of the University of Lisbon: https://www.repository.utl.pt/handle/10400.5/12367

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