Abstract
ABSTRACT Lines of credit (LOC) involving facilities such as credit lines or overdrafts have clear benefits for firms, such as facilitating cash flow and working capital management. However, there is little evidence regarding the problems that LOC can hide or originate. We use survival analysis to show that the transition time to vulnerability is shorter for small and medium-sized enterprises (SMEs) that used these facilities immediately after the 2009 financial crisis. Firms that use the LOC seem to be in a weaker position, making it more difficult to overcome a financial crisis. Additionally, during a reversal of the financial and economic situation, using LOC could precipitate further restrictions because of the refinancing risk that these facilities might add to the firm. Consequently, more attention should be paid to the extended use of credit lines and overdrafts in Europe.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
