TY - JOUR

T1 - Bank lines of credit for small business clients: Cash substitution and funding source

AU - Schertler, Andrea

AU - Hubensack, Carsten

AU - Pfingsten , Andreas

PY - 2015/2/1

Y1 - 2015/2/1

N2 - We investigate whether small business clients could use revocable credit lines, firstly, in their cash management and, secondly, as a funding source. Since the medium-size bank that provided our unique sample has the right to call these lines and charges considerably high rates for using them, we argue that these lines are particularly suitable for managing short-term liquidity needs. From our findings on how the line terms (line availability, line limit, and charged line rate) depend on a client’s liquidity-at-risk, the duration of its relationship with the bank, and its limit overdrafts, we nonetheless conclude that these lines, although they are revocable, fulfill both purposes.

AB - We investigate whether small business clients could use revocable credit lines, firstly, in their cash management and, secondly, as a funding source. Since the medium-size bank that provided our unique sample has the right to call these lines and charges considerably high rates for using them, we argue that these lines are particularly suitable for managing short-term liquidity needs. From our findings on how the line terms (line availability, line limit, and charged line rate) depend on a client’s liquidity-at-risk, the duration of its relationship with the bank, and its limit overdrafts, we nonetheless conclude that these lines, although they are revocable, fulfill both purposes.

KW - Management studies

U2 - 10.15375/zbb-2015-0202

DO - 10.15375/zbb-2015-0202

M3 - Journal articles

VL - 2015

SP - 84

EP - 107

JO - Zeitschrift für Bankrecht und Bankwirtschaft

JF - Zeitschrift für Bankrecht und Bankwirtschaft

SN - 0936-2800

IS - 2

ER -