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

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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.
Original languageEnglish
JournalZeitschrift für Bankrecht und Bankwirtschaft
Volume2015
Issue number2
Pages (from-to)84-107
Number of pages24
ISSN0936-2800
DOIs
Publication statusPublished - 01.02.2015

DOI