Credit rationing for Portuguese SMEs

•This study examines the importance of credit demand and supply-related factors.•The model was estimated for Portuguese SMEs in the period between 2010 and 2012.•We used a disequilibrium model where the interest rate may not clear credit market.•The results suggest that a large fraction of Portuguese SMEs were credit rationed.

This study examines the importance of credit demand and credit supply-related factors in explaining the evolution of credit granted to Portuguese SMEs. The results suggest that the interest rate is a strong driver of SMEs' demand for bank loans, as well as their internal financing capacity. On the other hand, credit supply mostly depends on the firms' ability to generate cash-flows and reimburse their debt, and on the amount of collateral. The model was estimated for the period between 2010 and 2012. The results suggest that a considerable fraction of Portuguese SMEs were affected by credit rationing in this period.