Impact of Bank Loans Arrangement for SME's (Small and Medium Enterprises) by Commercial Banks in the UK

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I [type your full first names and surname here], declare, that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for the academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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ABSTRACT

The study is the base on the Impact of Bank loans arrangement for SME's (small and medium enterprises) by commercial banks in the UK. The main aim of the research is to discuss the relationship between the SMEs and the commercial banks. It has been observed that UK commercial banks are arranging bank loans mainly for the SMEs with the initial flexible terms and conditions. The research methodology is based on the secondary research method; the prior researches will be discussed critically as well as the research question will be discussed in detail with relation to the factors that are affecting towards loan facility. Finally, the research proposal will be concluded with relation to the research question and the Impact of Bank loans arrangement for SME's.

Table of Contents

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

INTRODUCTION1

Title1

Background of the Research1

Problem Statement1

Research Question2

Significance of the Research2

LITERATURE REVIEW3

Introduction3

Commercial Banks and Loans3

Bank Loan and Its Interest Rates4

METHODOLOGY5

Research Design5

Search Technique5

Literature Search5

ANTICIPATED RESULTS7

CONCLUSION11

REFERENCES12

INTRODUCTION

Title

Impact of Bank loans arrangement for SME's (small and medium enterprises) by commercial banks in the UK.

Background of the Research

Bank loans could be categorized into two groups: term loan and revolving line of credit. With a term loan, a complete withdrawal of funds is required on deal inception and the full amount of loan is subject to repayment before maturity. With a revolving loan, SMEs may obtain additional funds if the line of credit is not fully drawn. Since lines of credit are used for corporate liquid management, borrowers would have an incentive to obtain greater amount of funds in a revolver as their financial conditions deteriorate. Therefore, the performance pricing provision is more likely to be included in a revolver so as to mitigate ex post opportunistic behavior of borrowers. We define a dummy variable Revolver which is equal to one if the loan is a revolver and zero otherwise.

Problem Statement

Taking a loan is very important and common procedure in the SMEs because companies take loans to invest in their businesses and the same time if the company needs to expand the businesses than they applied loans from several commercial banks over certain terms and conditions. While most of loans involve several banks, it is the bank arrangers' responsibility to negotiate directly with the SMEs and monitor contractual terms. Our analysis on commercial banks characteristics will then focus on lead arrangers. It has been observed that the commercial banks are getting more and more involved in providing a loan to these SMEs at very low interest ...