The pandemic had an unprecedented impact on the Belgian economy and affected different firms and different economic sectors to varying degrees. Given the prominence of bank lending in Belgium’s economy, it is interesting to know how corporate credit conditions changed during the pandemic.

After documenting signs of perceived credit tightening through qualitative surveys, this study quantitatively analyses the conditions attached to new loan contracts and explores the heterogeneity across firm size and economic activity. Overall, it reveals a rather short-lived tightening of certain credit conditions during the pandemic: compared to the pre-pandemic period, interest rates and collateral requirements increased more for SMEs than for large companies during the pandemic. In addition, compared to firms in the least affected sectors, companies in the most affected sectors saw a greater decrease in the borrowed amounts and a greater increase in collateral requirements.

Finally, the analysis relies on survey data to better understand the supply- and demand-side drivers of the observed signals of temporary tightening of lending conditions. Banks reported a short-lived increase in risk perception. Small and medium-sized enterprises indicated high demand for bank credit but, at the same time, a deterioration in the perceived availability of bank loans, an increase in loan application rejections, a higher incidence of borrowers obtaining insufficient amounts or even being discouraged from applying for a loan. These findings together suggest some credit rationing during the pandemic, which was likely to drive a moderate tightening in borrowing conditions.

Additionally, this study demonstrates the complementarity of qualitative and quantitative analyses and shows how surveys can help to better understand the results of econometric analysis and uncover patterns that cannot be observed in the microdata.