An agency perspective on bank lending practices to small family businesses

This paper examines how banks lend to small family businesses relative to other small firm types from an agency perspective, and develops propositions that could be tested in future studies. Using a small number of structured interviews, banks were asked about their lending practices to small business generally, and if these practices in any way varied when lending to small family firms. Similarly, family firms were asked about their experiences generally when borrowing from banks, and whether they perceived any differences in the way they were treated. The study examines the reported actions of banks lending to small family firms, and relate these actions back to potential differences in agency costs either between the lender and the firm, or between firm managers and owners.