The geographical and entrepreneurial outcomes of borrower discouragement

This paper makes a novel contribution to the regional entrepreneurship literature by examining spatial differences and outcomes of borrower discouragement. Utilising a large firm dataset, we find that 19.1% of UK firms are discouraged borrowers, and that spatial rates of discouragement vary considerably. The smallest and most risky firms do not even bother applying, thereby reducing firm-level investment and growth opportunities. Discouraged borrowers are less likely to invest in fixed assets and training, thereby constraining their future growth potential. Spatially calibrated policy instruments and stimulating demand for financial literary and advice are potential ways to help mitigate against discouragement.