Overcoming Banking Limitations: the Use of Alternative Finance

The present article explores the relationship between bank credit constraints and the utilization of alternative financing for a sample of Latin American SMEs. It analyzes whether the inability of businesses to obtain bank credit affects the likelihood of turning to other forms of financing, such as informal loans, personal loans, or trade credit. Logit models are estimated to test whether companies facing bank credit constraints can access alternative forms of financing. The results reveal that the probability of using alternative financing is conditioned by both the type of instrument and the nature of the restriction, whether it originates from the supply or the demand.