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Loan Guarantee Schemes in the UK: The Natural Experiment of the Enterprise Finance Guarantee and the 5 Year Rule

Cowling, M.; Robson, P.; Stone, I.; Allinson, G.

Loan Guarantee Schemes in the UK: The Natural Experiment of the Enterprise Finance Guarantee and the 5 Year Rule Thumbnail


Authors

M. Cowling

P. Robson

I. Stone

G. Allinson



Abstract

Loan guarantee schemes have existed since 1953 (in the US) and are widely used throughout the world to provide financial support to smaller firms by guaranteeing loans from commercial banks. The UK government has been an active supporter of loan guarantees since 1981, and has a long track record of modifying its scheme to reflect changing market conditions and the financing needs of its SME sector. Arguably the two most significant changes occurred in 2008 when the 5-Year Rule on eligibility was removed and in 2009 when the long-standing Small Firms Loan Guarantee Scheme was replaced by the Enterprise Finance Guarantee Scheme. We treat the removal of the 5-Year Rule as a natural policy experiment and empirically question whether, on economic grounds, this was a sensible policy. Our findings suggest that the 5-Year Rule was a better policy choice with regard to employment but had no impact on sales growth.

Citation

Cowling, M., Robson, P., Stone, I., & Allinson, G. (2018). Loan Guarantee Schemes in the UK: The Natural Experiment of the Enterprise Finance Guarantee and the 5 Year Rule. Applied Economics, 50(20), 2210-2218. https://doi.org/10.1080/00036846.2017.1392004

Journal Article Type Article
Acceptance Date Oct 6, 2017
Online Publication Date Oct 23, 2017
Publication Date Apr 27, 2018
Deposit Date Oct 23, 2017
Publicly Available Date Mar 28, 2024
Journal Applied Economics
Print ISSN 0003-6846
Electronic ISSN 1466-4283
Publisher Taylor and Francis Group
Peer Reviewed Peer Reviewed
Volume 50
Issue 20
Pages 2210-2218
DOI https://doi.org/10.1080/00036846.2017.1392004
Public URL https://durham-repository.worktribe.com/output/1342093

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