The role of demographics in small business loan pricing

Arbeitspapier

To sustain growth in an aging economy, it is important to ease the financing of small firms by bank loans. Using bank internal data of small business loans in Germany, we examine the determinants of loan rates in the period 1995-2010. Beyond characteristics of the firm, the loan contract, and the lending relationship, demographic aspects matter. However, collateral and relationship lending play a larger role in loan pricing than the entrepreneur's age. Banks do not seem to discriminate older borrowers by higher loan rates. We rather find statistical discrimination of younger borrowers because of their lower wealth. Single entrepreneurs obtain cheaper loans than married ones. Firms in peripheral regions with low population density are disadvantaged by higher loan rates compared to those in agglomerated regions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Thünen-Series of Applied Economic Theory - Working Paper ; No. 134

Classification and Topics

• Classification: Wirtschaft ; Household Saving; Personal Finance ; Interest Rates: Determination, Term Structure, and Effects ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination ; Entrepreneurship
• Subject: small business finance ; savings banks ; relationship lending ; aging ; demographic change

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Neuberger, Doris ; Räthke-Döppner, Solvig
• Event: Veröffentlichung
• (who): Universität Rostock, Institut für Volkswirtschaftslehre
• (where): Rostock
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/92374
• Last update: 10.03.2025, 11:42 AM CET