the fact that larger firms use more internal sources of financing. Moreover, higher GDP growth rates increase the probability of getting a loan. An important factor affecting the probability of a firm getting a loan is the total number of loans that a firm had in the past. This variable has a positive sign and is significant in all the estimations. This may be reflecting the importance of having a credit history in order to get a new loan. The impact of the maturity of the loans is also negative and significant in most of the estimations.

The variables that matter the most for new firms to access bank credit are loan characteristics such as real bank interest rates and loan maturity, firm characteristics such as size (whether or not it is big), macroeconomic conditions such as GDP growth, inflation, and BNDES share in credit), and previous access to credit (number of loans per firm). While firm size seemed to matter a lot in the period 2003-06, this does not appear to be as important in the more recent sample (2007-09). We also observe the increased role of BNDES financing, but with a negative coefficient, a system of public directed crowding out private credit in the case of all loan types except overdraft and goods and acquisition loans. The impact of cyclical downturns appears to be mitigated, as signaled by the decreased significance of GDP growth, though the coefficient increased. This is in line with the small impact of the global financial crisis on credit access in 2009, when despite a contraction in GDP, directed credit growth through BNDES helped maintain credit market liquidity.

# **6. Conclusion**

We investigate the determinants of small-firm access to credit over the past decade in Brazil. We find over the decade improved access to finance for small firms which reflects the deepening of the credit markets. While firm size mattered in the 2003-2006 period to get access to credit, firm size is not as important in the 2007-2009 sample. Loan characteristics such as real bank interest rates and loan maturity, macroeconomic conditions (such as GDP growth, inflation, and BNDES share in total credit), and previous access to credit (number of loans per firm) also matters for access to Bank credit. The latter finding points to the importance of information availability (less information asymmetry) to reduce risk and increase access, which is captured in the positive influence of collateral and credit history in the regression. Banks perceive it less risky to lend to firms that they know or that other Banks know. This is consistent with the spreads decomposition that indicates the importance of risk as one of the main component of spreads. This finding has policy implications on the role of credit registries in increasing access to credit for firms.

The loan demand and loan supply analysis points to the importance of collateral. The availability of collateral is a significant variable in all the estimations. In particular, firms that can provide collateral exhibit a higher demand for overdraft, vendor and working capital loans We find that the supply of discountable and working capital loans increases for firms that can provide collateral. However, the availability of collateral is not a significant factor affecting the supply of other types of loans. Maturity matters for loan demand. The maturity of the loan has a positive and significant impact on the demand for discountables, overdraft and working capital loans indicating that though there have been improvements on increasing loan maturity, loans with longer maturity are wanted. Policy implication for increasing access to longer term loan maturity and on collateral would matter for small firm financing constraints. Finally, further research is needed to better understand the results on the elasticity of loan demand and loan supply to interest rates. We find some inelasticity of loan demand at the loan category level, maybe already reflecting some screening and pricing, however when the loans are aggregated , the effect of interest rates becomes significant and negative as expected. On the supply side, bank real interest rate associated is a positive and significant effect only in the supply of overdraft, G&A and vendor loans.

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