# <u>Table 3.</u> Firms’ Financing Constraints by Firm Size **Most important financing constraints (2003) Freq. Percent Cum.**

|**Most important financing constraints(2003)**<br> <br>**All Firms**|**Freq. **<br>|**Percent **<br>|**Cum.**<br>|
|---|---|---|---|
|Lack of collateral|43|38.7|38.7|
|Poor credit history|29|26.1|64.9|
|Incompleteness of application|18|16.2|81.1|
|Perceived lack of feasibility of project|11|9.9|91.0|
|Other|10|9.0|100.0|
|Total|111|1000||
|<br>**Small Firms**||.||
|Lack of collateral|38|41.8|41.8|
|Poor credit history|21|23.1|64.8|
|Incompleteness of application|16|17.6|82.4|
|Other|9|9.9|92.3|
|Perceived lack of feasibility of projec|7|7.7|100.0|
|Total|91|100.0||
|<br>**Medium Firms**||||
|Poor credit history|7|38.9|38.9|
|Lack of collateral|4|22.2|61.1|
|Perceived lack of feasibility of projec|4|22.2|83.3|
|Incompleteness of application|2|11.1|94.4|
|Other|1|5.6|100.0|
|Total|18|1000||
|**Large Firms**||.||
|Poor credit history|1|50.0|50.0|
|Lack of collateral|1|50.0|100.0|
|Total|2|100.0||

The data on the “banks side” cover all the banks that are lending to the firms in the data, and include bank specific characteristics from 2003 to 2009. They capture leverage (debt to equity ratio), profitability (net profit/net capital), size (assets are in the top 90 percentile of the banking system), risk (as measured by the Basel index), liquidity (immobilization index), intermediation (operation of credit/revenues from intermediation operations).

The data are complemented by information on the main partner bank from the Central Bank of Brazil’s credit registry, the Central de Risco, on the bank’s five most common types of lending products, the flows of lending by product, and the interest rates charged. The five most common corporate loan categories are: discount receivables, working capital, overdraft, goods acquisition finance, and vendor. Working Capital is a collateralized credit line that is geared towards meeting the cash-flows needs of a firm during its operational cycle. Overdraft is a line of credit that can be used without collateral by a firm until a certain credit limit is reached. Hence, overdraft commands the highest interest rates in our sample. Discount receivable is a type of loan based on an invoice that the firm will receive in the future. Vendor is a short term credit line (180 days or less in general) through which a company can finance their clients. It is highly collateralized, and has the lower interest rates in our sample. Finally acquisition of goods and services is a credit line for the purchase of goods. Collateral is required, usually the good itself but sometimes it could be a promissory note.<sup>5</sup> The Central de Risco data is monthly from2003 to 2009.

5

> • working capital [working capital]: credit lines characterized for a period exceeding 30 days, contract signing and presentation of specific guarantees, intended to finance the operational activities of enterprises;

> • guaranteed account [overdrafts]: credit linked to the corporate bank account in which a limited resource is made available for use in accordance with customer convenience;

> • discount bills and promissory notes [discountable]: advance of funds from the duplicates in collection or promissory notes, which

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