Original Article

The effect of firm characteristics in

accessing credit for SMEs
Received (in revised form): 6th December 2012

H. Semih Yildirim
earned his PhD in Business Administration with specialization in Finance from the University of Tennessee and his MBA degree from
Rochester Institute of Technology. His research interests encompass regulation, the market structure of the financial services industry
and their effects on competitive conduct and performance of the financial services firms. His research has been published in a wide range
of academic journals. He has taught at the University of Tennessee, the University of Saskatchewan, and York University.

Yavuz Akci
joined the University of Gaziantep in 2001. He earned his MBA degree from University of Gaziantep in 2004 and his PhD in Business
Administration with specialization in Products and Marketing from the Dumlupınar University in 2012. His research was published in
numerous books, journals and conference proceedings. He has taught various graduate and undergraduate courses in the fields of
marketing and accounting at the University of Gaziantep.

Ibrahim Halil Eksi

is an Assistant Professor at the University of Gaziantep since 1998. He earned his MBA degree from the University of Gaziantep in 2003
and his PhD from Süleyman Demirel University in 2007. He has published in numerous journals in Turkish and English. He has taught
various graduate and undergraduate courses in finance at Kilis 7 Aralık University.

ABSTRACT Small and medium-sized enterprises (SMEs) play an important role in socio-
economic development. Despite their significance, the failure rate for SMEs is considerably
high, especially in developing economies. Among the widely pronounced reasons for the
high failure rate is non-availability of external financing. This study examines various firm
attributes that affect access to credit using a sample of 970 SMEs that operate across
nine provinces of Mediterranean and Southeast Anatolia regions in Turkey. The results
suggest that asset size, sales volume and stability, export rate, and legal form are important
determinants of satisfaction with bank products and services. These results are consistent
with the hypothesis that larger firms with high and stable sales revenues are more likely
to have better access to and therefore benefit more from credit services offered by their
local banks.
Journal of Financial Services Marketing (2013) 18, 40–52. doi:10.1057/fsm.2012.28

Keywords: SME finance; bank-firm relationship; factor analysis

INTRODUCTION their flexible production structure, they can

Small and medium-sized enterprises (SMEs)
are the engines of sustainable economic and
social development as they account for the
majority of global employment. Owing to
Correspondence: H. Semih Yildirim
School of Administrative Studies, 218 Atkinson Building, York
University, Toronto, ON, M3J 1P3 Canada
adapt to changing market conditions more
effectively and play a critical role in reducing
unemployment. Because of their importance,
policymakers make considerable effort in
formulating and implementing strategies to
create an environment conducive to SME
development. Despite their economic and
social significance, the failure rate for SMEs

© 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
www.palgrave-journals.com/fsm/
 The effect of firm characteristics in accessing credit for SMEs
is considerably high, especially in developing
economies.
Financing is frequently cited as one of the
most pressing issues in studies that evaluate
the problems faced by small and
medium-sized firms, even more so in the
aftermath of financial crises. SMEs face
substantial constraints when they need to
finance the necessary investments and
improve their innovative capacities. Lack of
sufficient equity and working capital,
difficulty in obtaining debt financing, and
hardship in raising money through issuing
stocks in capital markets are among the
major financial challenges experienced by
these firms.
SMEs are important customers for banks
since bank loans generally constitute the
primary source of external financing needs of
these businesses. Although SMEs represent
the majority of bank business customers,
their local credit suppliers do not sufficiently
cater to the needs of SMEs, or usually do it
with unfavorable lending conditions. Banks
are not eager to extend credit since SMEs’
business activity is perceived to be risky and
hard to collateralize. Add to these factors the
lack of reliable credit history information
and undeveloped legal and institutional
environment in emerging economies.
As banks tighten their lending criteria,
availability of credit quickly dries up for the
firms that need it the most, leading to
negative consequences for innovation and
growth, and subsequently high failure rates.
SMEs have been a subject of great interest
both to policymakers and to researchers
because of the vital role they play not only
in the economy but also in the maintenance
of social stability. The recent and ongoing
financial crises across the globe have further
increased the interest in the role of SMEs in
job creation and economic growth. The
conventional wisdom among the researchers
and policymakers is that the lack of access to
credit is rooted in supply-side factors (De la
Torre et al, 2010). While there is a
considerably large body of literature that
© 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
advanced our understanding of the banking
side of SME lending, the research on the
demand side is relatively scant, especially for
developing markets. This study contributes to
the literature by characterizing bank
financing to SMEs from the demand/firm
side. We use the satisfaction level with credit
services offered by local banks as an indicator
of availability of and access to credit by
assuming that SMEs that are successful in
their credit application will exhibit higher
satisfaction rates.
In this study, we examine various firm
attributes that affect satisfaction with credit
services using a sample of 970 firms that
operate across nine provinces of
Mediterranean and Southeast Anatolia regions
in Turkey. We find that asset size, sales
volume and stability, export rate, and the
legal form have significant impact in shaping
the firms’ perceived satisfaction with bank
products and services. Specifically, we
discover that sole proprietor firms with asset
size of less than TL25 000, monthly sales
volume of less than TL10 000, export rate of
smaller than 20 per cent and unstable sales
revenues tend to exhibit lower levels of
satisfaction in their bank relationships. These
results support the notion that larger firms
with high and stable sales revenues are more
likely to make better use of and therefore
benefit more from credit services offered by
their local banks. To the extent that SME
decision makers’ pleasure with bank services
and products can be used as a proxy for the
level of accessibility to credit, our results can
provide insights into how banks are financing
SMEs, and help policymakers in their
decision-making process.
BACKGROUND AND RELATED
LITERATURE
Earlier studies find that lowering constraints to
external financing for SMEs contributes to
economic growth, reduced income inequality
and reduced poverty (Rajan and Zingales,
1998; Levine, 2005; World Bank, 2008).
At the firm level, increasing the channels of
41
 Yildirim et al
financing can enhance entrepreneurial activity,
contributing to employment, innovation and
income (Paulson and Townsend, 2004; Beck
et al, 2005). However, there is a widely
held consensus in the literature that SMEs
experience more difficulty in accessing finance
compared with the larger firms and lack of
access to external finance is a key obstacle
hindering innovation and growth (see, among
others, Schiffer and Weder, 2001; Cressy,
2002; IADB, 2004; and Beck et al, 2005,
2006). In addition, several studies show
that SMEs not only perceive access to finance
and the cost of credit to be greater obstacles,
but these factors affect their performance
more relative to the large firms (Schiffer
and Weder, 2001; Beck et al, 2005, 2006).
Lacking adequate level of internal capital,
SMEs inherently need external equity and
debt financing to start and expand operations,
develop new products, employ new staff, and
invest in production facilities. They have
substantially limited resources to raise money
through issuing stocks in capital markets.
Furthermore, only a small portion of SMEs
can generate high returns sufficient to attract
venture capital, private equity or other forms
of risk capital. Owing to the existence of this
marketplace financing gap, bank-firm
relationship plays an important role in
obtaining financing for SMEs. According to
an extensive World Bank survey, SMEs rely
heavily on bank financing in both developed
and emerging economies (De la Torre et al,
2010). However, unavailability of bank
credits, paradoxically, is a widely cited
constraint in SME financing.
Beck et al (2008) find that banks consider
the SME segment to be highly profitable,
but perceive macroeconomic instability in
developing countries and competition in
developed countries as the main obstacles.
The authors note that compared with large
firms, banks are less exposed to small
enterprises, charge them higher interest rates
and fees, and experience more non-
performing loans from lending to them.
Factors that can reduce the risk and
42 © 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
uncertainty and improve the probability of
loan success such as institutional stability and
predictability are often absent in emerging
economies (Ahlstrom and Bruton, 2006).
Undeveloped property rights, unpredictable
law enforcement and insufficient business
data reduce the ability of local banks to
follow the standard procedures and force
them to rely on different lending practices in
these countries (Ngoc et al, 2009).
The most frequently cited factor that
hinders the availability of bank financing is
SMEs’ ‘opaqueness’ (see, for example, Berger
and Udell, 1998; Cole et al, 2004; and
Hyytinen and Pajarinen, 2008). Opaqueness
refers to the difficulty faced by banks to
ascertain if the borrower has the ability and
willingness to payback the extended loan.
The opaque nature of SMEs undermines
lending from institutions that engage in more
arms-length financing that requires hard,
objective and transparent information (De la
Torre et al, 2010). Banks can mitigate this
information asymmetry problem by engaging
in long-lasting ‘relationship banking’, where
loan officers obtain soft information through
repeated interactions with the firm. Examples
of soft information include the character and
reliability of the SME’s owner; the credit
history of the firm gathered from the past
transactions; the future prospects of the SME
garnered from past communications with
SME’s suppliers, customers or neighboring
businesses (Berger and Udell, 2006). There is
reliable evidence that banking relationships
generate valuable private information about
borrower quality (Cole, 1998) and reduce
loan interest rates (Petersen and Rajan, 1994).
Earlier studies widely acknowledge several
firm characteristics as important factors
affecting access to finance. For example, the
age of the firm can signal to the market the
resilience of the business to sail through
difficult times. As younger firms usually lack
the financial resources necessary to withstand
harsh economic conditions, they present a
higher probability of failure (Bougheas et al,
2005). Owing to their opaque nature, it is
 The effect of firm characteristics in accessing credit for SMEs
hard and costly to obtain reliable information
on SME credit quality. The analysis of Ngoc
et al (2009) documents that young SMEs face
more difficulty to access bank financing and
incur higher costs, due largely to information
asymmetry between the banks and the firms.
The lenders use the financial information
obtained from the firm’s financial statements
to determine the possibility of delinquency.
According to Sarapaivanich and Kotey
(2006), the lack of adequate information
leads to information asymmetry and credit
rationing. Since young and small firms will
not likely have a well-established record
keeping system and readily available audited
financial statements, they suffer more from
the asymmetric information problem.
Burkart and Ellingsen (2004) note that the
firm size is an important determinant of
leverage ratios since firms with more tangible
assets tend to have greater access to long-
term debt. Larger firms are more diversified
and hence have lower variance of earnings,
making them able to tolerate high debt ratios
(Titman and Wessels, 1988), and less prone
to failure (Warner, 1977). Smaller firms, on
the other hand, may find it relatively more
costly to resolve information asymmetries
with lenders (Castanias, 1983). SME lending
decisions are traditionally made on the
availability of full collateral, by granting the
bank a claim on the firm’s tangible assets
such as land and buildings to cover losses in
case of default. Coco (2000) notes that
collateral can effectively mitigate the
information asymmetry and moral hazard
problems, uncertainty about the riskiness of
borrowers, and problems related to the cost
of monitoring or supervising borrowers’
behavior. SMEs with large assets can increase
their financial leverage and reduce their
cost of borrowing by securing their debt
with such assets. Lacking the sufficient assets
as collateral, smaller firms are more likely to
be turned down on their financial requests
or to obtain loans at higher rates of interest
(Stiglitz and Weiss, 1981; Pettit and Singer,
1985).
© 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
The choice of legal form of business can
also affect the availability of external finance
and the capital structure decisions of SMEs.
A sole proprietorship is a business vehicle
owned by one person who is liable for all of
the debts and other obligations of the
business. Incorporation, on the other hand,
limits the liability of a corporation’s
shareholders to the capital they contribute.
From the bank’s point of view, incorporation
can offer benefits if it reflects the seriousness
of the business activity (Storey, 1994), or
serve as a strong signal to portray credibility
and formality of operations if it represents
an indicator of future growth potential
(Cassar, 2004). Coleman and Cohn (2000)
report a positive relationship between
leverage and incorporation. Freedman and
Godwin (1994) find that incorporation is
positively associated with greater use of bank
financing.
Sales volume and stability are directly
related with the business risk and profitability
of the SMEs. The volatility in a firm’s sales
and earnings stream increases the chance of
default, and reduces the capacity to borrow.
Firms with more volatile earnings growth
may experience more situations in which
cash flows are too low for debt service
( Johnson, 1997). Profitable firms are more
attractive to financial institutions as lending
prospects as they may be in a position to
employ and service more debt easily and on
time (Ang, 1991; Ooi, 1999). Furthermore,
involvement in international trade can make
SMEs less vulnerable to fluctuations in
domestic demand, improving the export-
oriented firm’s financial soundness and
profitability.
Stancill (1980) considers choosing the bank
to work with as the most important firm
decision since bank-firm relationship plays a
crucial role in controlling costs and sailing
through turbulent times. This argument has
long been recognized in studies that tackle
the financing problems SMEs face. For
example, Yörük (2001) observes high rates of
interest, short maturity terms and insufficient
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 Yildirim et al

loan sizes as major issues for Turkish firms in Table 1: Provinces, firm and bank branch numbers
obtaining bank credit. In a related work, % of Bank
Karabıçak and Altuntepe (2001) report high Region/provinces Firms sample branchesa
borrowing costs, inability to provide Mediterranean
adequate collateral and the mechanism of Adana 198 20.4 190
Turkish banking system as obstacles in Hatay 137 14.1 95
Mersin 108 11.1 138
obtaining credit. We are not aware of any Osmaniye 57 5.9 24
study that specifically looks at firm Kahramanmaras¸ 76 7.8 48
characteristics as a determinant of satisfaction Southeast Anatolia
level from financial services. One exception Adıyaman 46 4.7 22
Diyarbakır 105 10.8 61
to this is Karamustafa and Karakaya (2003), Gaziantep 193 19.9 88
which examines the relationship between S¸ anlıurfa 50 5.2 50
debt-to-asset ratio and firm satisfaction level. Total 970 100 716
We are not also aware of any study that
a
Bank branch numbers are obtained from ‘Regional Development
examines the impact of sales stability and Data’ published by The Ministry of Development. According to the
data, total branch numbers are 784 in Mediterranean Region, 301 in
involvement in international trade on SME Southeast Anatolia Region and 7786 throughout Turkey.
satisfaction in bank relationship. This article
aims to contribute towards filling this gap in Table 2: Hypotheses tested
literature by examining the relationship
H1 Satisfaction levels of firms from financial products
between various firm characteristics and and service offerings are significantly different
levels of perceived satisfaction with bank with respect to their age
H2 Satisfaction levels of firms from financial products
offerings in the context of Turkish retail and service offerings are significantly different
banking environment. with respect to their asset size
H3 Satisfaction levels of firms from financial products
and service offerings are significantly different
RESEARCH METHODOLOGY with respect to their export levels
H4 Satisfaction levels of firms from financial products
and service offerings are significantly different
Sample with respect to their legal forms
The sampling frame for the data set consists H5 Satisfaction levels of firms from financial products
and service offerings are significantly different
of small and medium-sized firms that use with respect to their sales volume
services of banks operating across nine H6 Satisfaction levels of firms from financial products
and service offerings are significantly different
provinces of Mediterranean and Southeast with respect to their sales stability
Anatolia regions in Turkey. The data were
collected using convenience sampling
method. Inclusion of different cities had the consideration in the province selection process.
purpose of enhancing the generalizability of Limitations on travel time and means of
the findings. A self-administered interview authors, as well as geographical proximity of
method was used. the two regions have influenced the selection
Considering the potential differences in of sample regions. In the second stage, the
usage, motivations and expectations in bank face-to-face interview technique was adapted to
services across different sectors, only maintain equal participation opportunity for the
commercial firms are included in the sample. firms operating in the selected provinces.
Sample selection was done applying random Our extensive inquiries into the total
sampling technique in two stages. In the first number of firms operating in selected
stage, five provinces from Mediterranean provinces after appealing authorized
Region and four provinces from Southeast organizations and related agencies did not
Anatolia Region were selected using area yield definitive results. The survey was
sampling. The factor of significant contribution administered to a total of 1006 firms. Thirty-
to regional economy was taken into six firms are dropped from the sample due to

44 © 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
 The effect of firm characteristics in accessing credit for SMEs
incomplete and incorrect answers, resulting in
a final sample of 970 firms. This sample size is
more than ideal when compared with related
studies in this field. The distribution of firms
and bank branch numbers across two regions
and nine provinces are given in Table 1.
The proportion of bank branch
numbers in selected sample provinces to
total branch numbers in Turkey is
approximately 9 per cent. The proportion of
sample branch numbers to the number of
total operating branches is 63 per cent for
the Mediterranean and 73 per cent for the
Southeast Anatolian region. Based on the
branch numbers given in Table 2, it is safe
to say that the selected provinces have
adequate representative power of their
respective regions to conduct a study on
bank-firm relationship.
Measurement and statistical
methods
This study employs the survey method to
collect the field data. A preliminary
questionnaire draft was prepared after a
literature review on the topic before starting
the data collection. This draft was presented
to the executives of 10 commercial firms and
two banks in our sample for reviewing. The
definitive form was prepared after receiving
the management feedback on the issues such
as the clarity of questions in the form, the
order of questions, suggested response time,
and so on.
The questionnaire form is composed of
a total of 16 questions, of which six are
descriptive and 10 are explanatory in nature.
The respondents were asked to rate on a
5-point Likert scale (1 = ‘Strongly Disagree’
to 5 = ‘Strongly Agree’) with a mid-point
neutral category. Cronbach’s  value is 0.86,
providing evidence of the reliability of the
questionnaire form in measuring satisfaction
levels of firms.
Questions from the survey cover a variety
of topics including firm activities, the
markets served, whether the firm uses bank
finance, the firm’s perception of the ease of
© 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
obtaining finance from the bank, and the
bank’s attitude towards the firm. The goal is
to measure small business financial decision
makers’ satisfaction with their primary
financial institution across 10 variables:
interest rates; length of loan maturity;
transaction fees; collateral requirement;
special offers; restructuring of existing debt;
product offerings; problem resolution,
account manager; transaction speed. The
questionnaire also includes questions about
the nature of the SMEs legal form of
business, asset size, sales volume and stability,
and their involvement in international trade.
Most of the descriptive and explanatory
variables are chosen after consulting with the
firm and bank managers and some of them
are borrowed from earlier literature on the
subject.
The age and the size variables are included
in the model to account for information
asymmetry the bank faces in evaluating
creditworthiness of the client. Although
SMEs are generally considered opaque in
nature, older and larger firms can usually
provide better information to document their
financial condition and credibility and offer
more collateral. Furthermore, banks would
invest more time in the assessment of larger
firms due to their bigger loan sizes. The
volume and the stability of sales can be used
as a proxy for business riskiness by loan
officers to determine the approval of credit
to the SME and at what price. Export rate
measures the level of involvement in foreign
trade. Access to overseas markets can
facilitate sales growth. Developing
international business opportunities can also
help the SME sail through hard times when
the domestic market is slowing down. We
expect a positive relationship between age,
size, sales volume and stability, export levels,
incorporation and the satisfaction with
financial products and services.
The hypotheses summarized in Table 2 are
tested by employing factor analysis. Factor
analysis is a multivariate statistical method to
identify clusters of interrelated variables in
45
 Yildirim et al

terms of a potentially lower number of
unobserved, uncorrelated variables called
factors. Factor analysis can be used to reduce a
large number of variables to a smaller number
of factors for modeling purposes, where the
large number of variables precludes modeling
all the measures individually.
The appropriateness of data for factor
analysis is tested by the Keiser-Meyer-Olkin
measure of sampling adequacy and Bartlett’s
test. The number of factors can be obtained
by Kaiser’s criterion that recommends
retaining all factors with eigen values greater
than 1. After obtaining important factors, the
relationship between firm characteristics and
satisfaction level was analyzed using either
one-way ANOVA test or independent two
sample t-test, depending on the number of
groups the firm characteristic variable has.
If the hypothesis being tested involves
a variable with more than two groups (that
is, firm age, asset size, export rate, sales
volume, legal form), one-way ANOVA test
is used. ANOVA is a general hypothesis
testing technique that is used to test whether
the means among two or more groups are
equal. A major limitation of the results from
a one-way ANOVA is that although it tells
you whether the means are not equal to
each other, it does not tell you how the
means differ. Post-hoc tests can be conducted
in cases where you obtain a significant F-test
with a factor that consists of more than two
variables to determine which means are
significantly different from each other.
Among the widely used post-hoc tests are
Tukey and Bonferroni tests, of which this
study uses the former. If the variable being
tested has only two groups (that is, sales
stability), then we used independent two
sample t-test to compare the group means.
EMPIRICAL RESULTS
Firm characteristics
As shown in Table 3, the characteristics of
sample firms generally exhibit a balanced
distribution. In our sample 52 per cent of

Table 3: Firm characteristics

Sole General Limited

proprietorship partnership partnership Incorporation Total
Legal form
Frequency 506 45 298 121 970
% 52.2 4.6 30.7 12.5 100

Firm age (years) 1–5 6–10 11–15 16 and over Total

Frequency 255 221 192 302 970
% 26.3 22.8 19.8 31.1 100

Sales (TL1000) 1–10 11–50 51–100 100 and over Total

Frequency 95 257 232 386 970
% 9.8 26.5 23.9 39.8 100

Export 0% 1–20% 21–40% 41–60% 61–80% < 81% Total

Frequency 735 114 50 26 22 23 970

% 75.8 11.8 5.2 2.7 2.3 2.4 100

Asset size (TL1000) 1–25 26–50 51 and over Total

Frequency 199 284 487 970

% 20.5 29.3 50.2 100

Monthly sales Stable Unstable Total

Frequency 378 592 970

% 39 61 100

46 © 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
 The effect of firm characteristics in accessing credit for SMEs

the firms are established in the form of sole
proprietorship. About 64 per cent of the
firms have annual sales of TL50 000. Half of
the firms have an asset size of at least
TL50 000. About 40 per cent of the sample
firms have stable sales while remaining 60 per
cent experience fluctuations in sales volume.
Roughly three-quarters of the total firms are
not involved in any export activities.
Results of the factor analysis
First, the appropriateness of data for factor
analysis was determined by checking the
correlation matrix, which showed that eight
of the 10 variables have a correlation
coefficients of at least 0.30 and the other two
variables had a correlation coefficient of at
least 0.20. Variables with high correlations
are generally classified under the same factor.
As a result, these variables will also exhibit
high correlations with their respective factors.
Further, the Keiser-Meyer-Olkin measure of
sampling adequacy is found as 0.897 and the
Bartlett’s test showed that the correlation
matrix had significant correlations at the
significance level of 0.000; both are pointing
Table 4: KMO and Bartlett test results
Kaiser-Meyer-Olkin
measure of sampling
adequacy
Bartlett’s test of Approx. 2
sphericity
df
Significance
Table 5: Banking services satisfaction factor analysis
Factor loads of variables after rotation
Variables Factor 1 Factor 2
Transaction cost 0.76
Collateral 0.70
Interest rate 0.69
Special offers 0.67
Term to maturity 0.59
Restructuring 0.56
Product range 0.53
Approach — 0.84
Counseling — 0.74
Transaction speed — 0.63
to the appropriateness of sample for factor
analysis (Table 4).
Principal axis factor analysis revealed the
existence of two factors with eigenvalues
greater than 1, explaining 43.4 and 11
per cent of total variance, respectively. These
extracted two factors cumulatively account
for 54.4 per cent of the total variance. Since
a value between 40 and 60 per cent is
generally considered appropriate in social
sciences, we consider 54.4 per cent as an
acceptable level.
Varimax orthogonal rotation method was
used to make the interpretation of factors
easier. The decision to include a variable in
a factor was based on two criteria: (1) the
variable must have at least a factor load
of 0.50 and (2) a high common factor
variance. The factors extracted are classified
in Table 5 based on the variables they
represent. Factor 1 is comprised of the
variables that represent satisfaction with
financial products while Factor 2 includes
variables that represent satisfaction with the
way financial services are offered. Therefore,
Factor 1 and Factor 2 are, respectively,
called ‘financial products satisfaction factor’
and ‘financial services offering satisfaction
factor’.
0.897
HYPOTHESES TESTING
3.011
Results of ANOVA tests
45 Hypotheses that examine the effect of firm
0.000
age, asset size, export rate, legal form and
sales volume on satisfaction levels from
financial products (Factor 1) are tested using
ANOVA method. Test results are presented
in Table 6.
In our results, capacity factors such as asset
— size and sales volume proved very important
— in affecting satisfaction rates. Firm size has a
—
—
positive impact on the level of perceived
— satisfaction with financial products
— (P = 0.000). The Tukey test results suggest
—
that firms with asset size of less than
TL25 000 have lower satisfaction levels
compared with the other two groups.

© 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52 47
 Yildirim et al

Table 6: ANOVA test results on satisfaction levels from financial products

Firm characteristics Sum of squares df Mean square F Significance Tukey test

Firm age
Between groups 1.99 3 0.663 0.89 0.446 —
Within group 720 051 966 0.745 — — —
Total 722 041 969 — — — —

Asset size
Between groups 22 856 2 11 428 15.81 0.000* 1 and 2–3
Within group 699 185 967 0.723 — — —
Total 722 041 969 — — — —

Export rate
Between groups 49 976 5 9.995 14.34 0.000* 1 and 2–3–5–6
Within group 672 065 964 0.697 — — —
Total 722 041 969 — — — —

Legal form
Between groups 25 242 3 8.414 11.67 0.000* 1 and 2–3–4
Within group 696 799 966 0.721 — — —
Total 722 041 969 — — — —

Sales volume
Between groups 6423 3 2.141 2.89 0.035** 1 and 4
Within group 715 618 966 0.741 — — —
Total 722 041 969 — — — —
*and ** represent 1 and 5 per cent levels of significance respectively, in testing differences between group averages.

Similarly, monthly sales volume is also
significant determinant of satisfaction level
(P = 0.035). According to test results, firms
with monthly revenues greater than
TL10 000 seem to benefit more from
financial products. These results are possibly
a reflection of a lesser degree of ability to
make use of bank products by smaller firms
with lower sales volume.
Based on these results the following
observations can be made:
Both results are in line with our
expectations and consistent with the findings
of earlier studies. When evaluating credit
applications banks place a great weight on
the collateralized assets and firms’ historical
performance on their financial liabilities.
Significant amount of tangible assets and a
verifiable good credit history is the proof
that the borrower will have the resources
and the willingness to repay the debt. Large
firms usually have a more developed financial
record-keeping systems relative to smaller
firms. They also have greater banking needs
and therefore use more banking products.
Therefore, banks may prefer to spend more
time with firms with larger loan sizes.
Furthermore, since the firms in larger SME
segments generally exhibit higher turnover,
they can be treated with a better quality
service, as banks are more concerned with
keeping their business with this segment.
Our findings on the export rate point to
the same direction: the involvement in
international trade has a positive and
significant impact on access to and satisfaction
with external finance (P = 0.000). According
to the test results, firms with no exporting
activity exhibit lower degree of satisfaction
relative to firms with export engagement.
Export rate is a good indicator of experience
in international marketing and international
distribution networks. Developing
international business opportunities requires
extensive bargaining skills and a broad range
of financing needs. It is reasonable to assume
that firms that engage in international trade
will have different perceptions of satisfaction
as they benefit from a variety of products
offered by the banks.

48 © 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
 The effect of firm characteristics in accessing credit for SMEs

Table 7: ANOVA test results on satisfaction levels from financial service offerings

Service satisfaction Sum of squares df Mean square F Significance Tukey test

Firm age
Between groups 3237 3 1.079 1.388 0.245 —
Within group 750 919 966 0.777 — — —
Total 754 156 969 — — — —

Asset size
Between groups 19 482 2 9.741 12.82 0.000* 1 and 2–3
Within group 734 674 967 0.76 — — —
Total 754 156 969 — — — —

Export rate
Between groups 25 263 5 5.053 6.682 0.000* 1 and 2–6
Within group 728 893 964 0.756 — — —
Total 754 156 969 — — — —

Legal form
Between groups 10 239 3 3.413 4.432 0.004* 1 and 4
Within group 743 917 966 0.77 — — —
Total 754 156 969 — — — —

Sales volume
Between groups 19 024 3 6.341 8.333 0.000* 1 and 2–3–4
Within group 735 133 966 0.761 — — —
Total 754 156 969 — — — —
*
Represents 1 per cent level of significance, in testing differences between group averages.

Among the other controls, firm’s legal
form turns out to be significant. The results
suggest that legal form is an important SME
attribute in determining satisfaction level
(P = 0.000). Tukey test results indicate that
the satisfaction level of sole proprietorships
from financial products is lower compared
with partnerships. This finding is not
surprising and in line with our expectations
as corporations and partnerships naturally
benefit from financial products more than
individual proprietors.
Contrary to our expectations, firm age is
not a significant determinant of satisfaction
with financial products (P = 0.446). In other
terms, perceived satisfaction with bank
products does not differ among firms with
different ages. On average, the participants’
answers from questionnaire point to a scale
of ‘Neutral-Neither agree nor disagree’ level.
ANOVA test results for the hypotheses
that measure the impact of SME
characteristics on satisfaction level from the
way financial services are offered (Factor 2)
are presented in Table 7. The results for
financial services offerings are in line with
what we previously found for financial
products. Firm age does not have a
significant effect in determining the
satisfaction levels from conducting services by
banks (P = 0.245). However, legal form
(P = 0.004), firm size (P = 0.000), export rate
(P = 0.000) and sales volume (P = 0.000)
variables are all found to be important
determinants. Corporations with asset size of
greater than TL25 000, monthly sales volume
of more than TL10 000 and export size of
larger than 20 per cent have a higher level of
perceived satisfaction level with bank service
offerings. As we previously indicated, firms
with these characteristics are more likely to
make better use of and therefore benefit
more from financial services offered by their
local branches.
Results of t-tests
In this section we test the effect of the
stability of sales on the satisfaction levels
with financial product and service offerings
using independent two-sample t-test.

© 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52 49
 Yildirim et al
Table 8: t-test results for the relationship between sales stability and satisfaction
N Mean
Financial products
Stable sales 378 3.253
Unstable sales 592 3.062
Financial services
Stable sales 378 3.742
Unstable sales 592 3.605
* and ** represent 1 and 5 per cent levels of significance respectively, in testing differences between group averages.
The results presented in Table 8 reveal that
stability in sales has significant impact on
satisfaction levels from both financial
products (P = 0.001) and the way services
are offered (P = 0.019). On the 5-point
scale, the average satisfaction point from
financial products is 3.25 for firms with
stable sales and 3.062 for firms with unstable
sales. Similarly, the average satisfaction
level from financial services is higher
(3.74) for SMEs with more balanced sales
revenues than that for SMEs with changing
sales revenues (3.605). These results are
consistent with our expectations and in line
with the literature.
Banks consider the business risk as an
important criterion in credit evaluation.
Business risk refers to the inherent variability
and uncertainty of earnings that may have a
negative impact on the profitability of a
given company. Considering the strong
relationship between sales and earnings, the
variability in revenues directly translates to
higher business risk. If a firm is experiencing
wide fluctuations in sales, this creates an
uncertainty about the cash flows and the
ability to service outstanding debt. As a
result, firms with unstable sales will have
difficulty in accessing finance than those
whose sales are subject to only moderate
variances. Our results suggest that firms with
stable sales enjoy higher satisfaction levels
from financial products and services offered
by banks. This is most probably because
banks consider them less risky in terms of
meeting their fixed debt charges and offer
them loans in more favorable terms.
50 © 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
Sd df T P
0.833 968 3.375 0.001*
0.875 — — —
0.898 968 2.353 0.019**
0.869 — — —
CONCLUSIONS AND
RECOMMENDATIONS
For a sustainable development and growth,
the banking sector should thrive in parallel
with the real economy by providing the real
sector, especially the SMEs, with much
needed funds quickly, directly, and at minimal
costs. This function of channeling loanable
funds to small businesses by financial
institutions is more prominent in developing
countries where raising equity capital is highly
difficult. SMEs are often hampered by the
inability to obtain financial capital for growth
and expansion. Therefore, it is important to
understand the factors that can facilitate
accessing to necessary financing for the SMEs
and developing satisfactory relationships with
their financial intermediaries.
While there is an extant literature that
examines SME financing from many different
dimensions, the focus of this study is to
better understand the SME financing from
the demand side. With this objective, we
investigate the relationship between various
SME characteristics and levels of satisfaction
on financial services and products they use.
Our sample comprises of 970 small and
medium-sized firms that operate across nine
provinces of Mediterranean and Southeast
Anatolia regions in Turkey.
We find that asset size, export rate, sales
volume and legal form have significant impact
in shaping the firms’ perceived satisfaction
with financial products and service offerings
by banks. Specifically, we discover that sole
proprietor firms with asset size of less than
TL25 000, monthly sales volume of less than
 The effect of firm characteristics in accessing credit for SMEs
TL10 000, export rate of smaller than 20 per
cent and unstable sales revenues tend to
exhibit lower levels of perceived satisfaction
for bank services and products. The age of the
firms does not seem to be a distinguishing
factor in determining perceived satisfaction
levels. We also find that the average degree of
firm satisfaction with financial service offerings
is relatively higher than that of financial
products they use.
Overall our findings suggest that bigger
SMEs with larger sales volume, higher
involvement in international trade and
relatively stable revenues are more satisfied
with their banking relationships. To the
extent that difficulties in obtaining bank
financing translate into an increased
probability of dissatisfaction with financial
services and products, these results can provide
insights for policymakers in their decision-
making process. On the policy side, our
findings imply that the regulators should
develop a legal and regulatory framework to
create an environment conducive to SME
development especially for the smallest
businesses. Initiatives such as government
subsidized lines of credit, innovation funds,
public guarantee funds, venture capital, micro
finance, and so on are all essential for
expanding access to financial services for these
firms. SMEs also must be supported in their
efforts to expand into foreign markets through
various instruments such as credit insurance
guarantees and networking opportunities.
The results of this study also have
implications for the bank managers. A recent
survey by Ernst and Young (2011) on 20 556
banking customers across 23 mature and
emerging markets finds that service quality is
the biggest cause of customer attrition, with
48 per cent of worldwide customers who are
planning to change their main bank citing this
as the reason. It is more critical than ever that
banking firms need to deliver a more efficient,
customer-focused and innovative offering to
maintain customer satisfaction and retention.
To improve customer experience and increase
customer loyalty, banks need to continually
© 2013 Macmillan Publishers Ltd. 1363-0539 Journal of Financial Services Marketing Vol. 18, 1, 40–52
review their strategies and business models to
ensure that they are responding to customer
expectations. For bank managers, our study
provides hints on the important role of certain
SME characteristics and possible direction in
devising and implementing their strategies to
improve customer satisfaction in the provision
of financial services and products.
Although our study contributes to the
literature that seeks to better understand
banks’ involvement with SMEs, it suffers
from certain limitations. First of all, the study
examines the impact of internal factors on
the availability of external credit. However, a
wide range of economic and financial
variables can influence the loan supply and
credit conditions. Second, the focus of our
analyses is on the demand side of accessing
to credit based on SME perception, not on
the supply/bank side. The findings of this
study can be confirmed further by looking at
the factors that impact credit evaluations by
loan providers. Third, the analysis relies on a
data set collected using survey method. As
with any survey study the accuracy of the
data depends on subjects’ motivation,
honesty, memory and ability to respond.
Furthermore, although our sample size is
sufficiently large, its coverage is limited to
nine provinces from two regions out of a
total of 81 provinces and seven regions.
Analyses that utilize more extensive data
collected in other geographic locations might
yield different results because of socio-
economic and cultural differences among
regions. Finally, our study includes only
privately owned banks. It would be
interesting to extend our analysis to examine
the same issues across different bank types
such as private, public and foreign banks as
well as different geographic locations.
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