Neither true nor fairweather friend: relationship banking and SME borrowing under Covid-19

Tianshu Zhao*, Kent Matthews, Max Munday

*Corresponding author for this work

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A growing literature addresses the costs and benefits associated with relationship banking, particularly for smaller firms, but with much of this work focused on normal trading conditions. Covid-19 provides an ideal testbed to explore the resilience of relationship banking. We examine whether the presence of closer pre-Covid ties between SMEs and their banks helps in accessing funds in the Covid-19 pandemic period. Then are ties between relationship bankers and SME borrowers a case of ‘true love’ or rather are the parties more akin to ‘fair-weather friends?’ Data from the UK SME Finance Monitor from 2018Q2-2020Q3 is used in this paper to examine this question. Our analysis suggests that relationship banking was important for the acquisition of bank credit pre-Covid-19 but was of limited influence in post-Covid-19 lending behaviour. Banks treated SMEs that had a good relationship with them in the same way as those that did not and with public interventions to support lenders material in this.

Original languageEnglish
Number of pages18
JournalEuropean Journal of Finance
Early online date4 Jul 2022
Publication statusE-pub ahead of print - 4 Jul 2022

Bibliographical note

Funding Information:
We acknowledge support from the DFID-ESRC Research Grant (ES/N013344/2). We are grateful without implication to two anonymous referees for helpful comments. All remaining errors are ours.

Publisher Copyright:
© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.


  • Covid-19
  • SMEs
  • relationship banking

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)


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