Complementarity, Coordination and Credit

We consider a start-up firm run by an owner-manager who applies for a bank loan to implement a project based on two complementary activities. Complementarity can be improved by coordinating the activities, either by the manager or by delegating this task to an internal employee. In the former case coordination is not verifiable and moral hazard arises, while in the latter case the informational asymmetry is mitigated. We find parameter regions where, absent delegation, either the firm obtains no loan or surplus, defined as the sum of bank's and manager's utility, shrinks. We also consider bank monitoring, which yields both redistributive and surplus reducing effects.