Factors Influencing the Granting of Credit to Start-up Businesses

Abstract

New businesses play a key role in developing the Swedish economy and financing these enterprises is essential for a continuous growth. However, funding a start-up company may pose a significant problem as they hold only limited historical economic data and often conduct business on strict capital budgets. It is therefore of interest to break down the central factors in the assessment and analyse the process as a whole. The purpose of this report is to describe, elaborate and analyse the credit assessment process of Swedbank and SEB and the impending challenges that may surface when dealing with different industries. The report is limited to start-up business entities in the Gothenburg Area. The report has been executed using a qualitative method and an abductive approach. The empirical data has been collected through semi-structured interviews with four respondents from the banks. The report showed that factors essential to the assessment are; the company management, the relationship between the creditor and the credit applicant, corporate and personal financial data, the business plan, past experience and securities available. When dealing with different industries, advisors are expected to have general knowledge in different industries, but there are no industry-specific advisors. If there is uncertainty involved, the advisor has the power to increase the security or to waive the deal. The report also showed that the assessment process is permeated by rigorous laws as well as internal framework and protocol, however, there is still a risk of subjective influences on the final decision.