TY  - JOUR
AU  - Bodenhorn,Howard
TI  - Short-Term Loans and Long-Term Relationships: Relationship Lending in Early America
JF  - National Bureau of Economic Research Historical Working Paper Series
VL  - No. 137
PY  - 2001
Y2  - December 2001
UR  - http://www.nber.org/papers/h0137
L1  - http://www.nber.org/papers/h0137.pdf
N1  - Author contact info:
Howard Bodenhorn
John E. Walker Department of Economics
College of Business and Behavioral Science
201-B Sirrine Hall
Clemson University
Clemson, SC 29634
Tel: 864/656-4335
E-Mail: bodenhorn@gmail.com
AB  - Recent banking theory holds that durable firm-bank relationships are valuable to both parties.  Using contract-specific loan records of a nineteenth-century U.S. bank, this paper shows that firms that form extended relationships with banks receive three principal benefits.  First, firms with extended relationships face lower credit costs.  As the bank-borrower relationship matures credit costs decline.  Second, long-term customers are asked to provide fewer personal guarantees.  Third-party guarantees are an efficient alternative to collateral in certain circumstances, and long-term clients are asked to provide fewer guarantees.  Third, long-term bank customers more likely to have loan terms renegotiated during a credit crunch.  Firms without access to public debt markets rely on bank credit, and continued access during a credit crunch is important for small, informationally opaque firms.
ER  -