Limits on relationship lending and influences of new lending technology for small and medium-sized enterprises

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This study focuses on relationship lending, in particular, among various lending technologies for small and medium-sized enterprises and considers the limits and subjects of such lending historically and empirically. Soft information has already been absorbed and accumulated, but its function in examining loan application has changed. In Japan, relationships tend to be ultra long compared with those in Western countries. This is probably influenced by the traditional lending method in which a fixed collateral right is established and is particularly remarkable in rural areas. Relationships change more frequently for those small and medium-sized enterprises that have high growth potential. The number of relationships will also increase and decrease according to economic factors. There are also limits on relationship lending, such as small and medium-sized enterprises that have changed a relationship tend to do so again. Regional financial institutions are thus expected to tailor their original business models according to the characteristics of each region.