Loan characteristics, firm preferences and investment : evidence from a unique experiment

This paper uses a unique experiment conducted as part of the Investment Survey of the European Investment Bank (EIB) to provide novel evidence on firms' preferences over loan characteristics and the relation between terms of credit and investment decisions. The design of the experiment allows revealing firm's financing preferences and willingness-to-pay in a clean and straightforward manner. The results show that firms are especially sensitive to the loan amount, the collateral requirement and the interest rate. Results are heterogeneous between sectors, size classes and types of projects.