Firm size, bank relational strategy and credit: the mediating role of bank knowledge in small firm access to debt finance

Inadequate credit access is an acute problem for small businesses, particularly in the current economic climate. US banks have moved away from building long-term relationships with small firms. However, research is equivocal on whether such a strategic stance decreases small firms' credit access within the USA. Using the knowledge-based view of the firm, we examine the central role of a bank's knowledge about clients in determining small firm access to credit. Using a survey of 1,677 small firm executives in the USA collected by the National Foundation of Independent Business, we test whether a bank's relational strategy is actually associated with increased knowledge about small client firms. We then examine whether this knowledge translates into increased credit access. Additionally, we test whether client firm size is associated with increased bank knowledge about the firm and whether this knowledge translates into increased small firm credit access.