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"Small business loans"
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Small Business vulnerability to floods and the effects of disaster loans
In this paper, we examine the impacts of floods on businesses and the efficacy of small business administration (SBA) disaster loans on mitigating disaster aftereffects. We find lack of business adaptation to extreme events in the short term, indicating their extreme vulnerability to flood disasters. Our results further indicate that subsidized disaster loans are important for businesses, with statistically significant effects estimated for businesses employing fewer than 50 people. At the margin, for every additional dollar spent on disaster loans per establishment in a county, four small businesses survive. Gloomy projections about increasing frequency and severity of disasters imply there will be significant loss in local economic activities because of increased vulnerability of small businesses to these incidents. Moreover, these effects will have implications nationwide, given the vital role small businesses play in creating jobs.
Journal Article
Lending technologies, lending specialization, and minority access to small-business loans
We investigate minority access to smallbusiness loans using a probit model of loan application denial that recognizes two loan types (line-of-credit loans and non-line-of-credit loans) made by two lender types (commercial banks and nonbank financial institutions). We estimate our model on data from the 1998 Survey of Small Business Finances. We find evidence consistent with minority equal access to bank credit lines and nonbank non-line-of-credit loans in highly competitive loan markets; in less competitive markets we find evidence consistent with unequal access to these loans. We also find evidence consistent with unequal minority access to bank nonline-of-credit loans, regardless of loan market competitiveness. Our findings differ from previous research which treats small-business loans as a homogenous product and finds evidence consistent with unequal minority access to small-business loans generally. We argue that the existence of multiple small-business lending technologies and loan specialization by lenders account for our findings and demonstrate the need to treat small-business loans as a heterogeneous product when investigating equal access to small-business credit.
Journal Article
Finance and Growth at the Firm Level: Evidence from SBA Loans
We analyze linked databases on all SBA loans and lenders and on all U.S. employers to estimate the effects of financial access on employment growth. Estimation exploits the long panels and variation in local availability of SBA-intensive lenders. The results imply an increase of 3-3.5 jobs for each million dollars of loans, suggesting real effects of credit constraints. Estimated impacts are stronger for younger and larger firms and when local credit conditions are weak, but we find no clear evidence of cyclical variation. We estimate taxpayer costs per job created in the range of $21,000-$25,000.
Journal Article
Does Credit Competition Affect Small-Firm Finance?
While relaxation of geographical restrictions on bank expansion permitted banking organizations to expand across state lines, it allowed states to erect barriers to branch expansion. These differences in states' branching restrictions affect credit supply. In states more open to branching, small firms borrow at interest rates 80 to 100 basis points lower than firms operating in less open states. Firms in open states also are more likely to borrow from banks. Despite this evidence that interstate branch openness expands credit supply, we find no effect of variation in state restrictions on branching on the amount that small firms borrow.
Journal Article
Does the Classic Microfinance Model Discourage Entrepreneurship Among the Poor? Experimental Evidence from India
Do the repayment requirements of the classic microfinance contract inhibit investment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run profits but also default rates. The results, thus, indicate that debt contracts that require early repayment discourage illiquid risky investment and thereby limit the potential impact of microfinance on microenterprise growth and household poverty.
Journal Article
Who Supplies PPP Loans (and Does It Matter)? Banks, Relationships, and the COVID Crisis
We analyze the bank supply of credit under the Paycheck Protection Program (PPP). The literature emphasizes relationships as a means to improve lender information, which helps banks manage credit risk. Despite imposing no risk, however, the PPP supply reflects traditional measures of relationship lending: decreasing in bank size and increasing in prior experience, commitment lending, and core deposits. Our results suggest a new benefit of bank relationships: They help firms access government-subsidized lending. Consistent with this benefit, we show that the bank PPP supply, based on the structure of the local banking sector, alleviates increases in unemployment.
Journal Article
European SMEs’ growth: the role of market-based finance and public financial support
The study investigates the role of market-based finance and public financial support in aiding scaling up by European SMEs. First, we analyse the impact of public loan guarantee schemes on firms’ access to market-based instruments. Second, we study whether firms’ access to market-based finance and the use of public grants boost a firm’s (ex post) growth. The analysis is based on a unique and original dataset of about 31,000 Eurozone firms in the 2009–2020 period. The study finds that firms’ access to market-based finance is (i) driven positively by the previous use of public financial support schemes and (ii) has a positive effect on subsequent growth. In particular, SMEs display relatively higher growth in fixed assets, while for large firms, growth is mainly driven by current assets. Moreover, SME issuers using public grants achieve significantly stronger growth than comparable firms.
Journal Article
Covid and mental health in America
Using 44 sweeps of the US Census Household Pulse Survey data for the period April 2020 to April 22 we track the evolution of the mental health of just over three million Americans during the COVID-19 pandemic. We find anxiety, depression and worry had two major peaks in 2020 but improved in 2021 and 2022. We show that a variable we construct based on daily inflows of COVID cases by county, aggregated up to state, is positively associated with worse mental health, having conditioned on state fixed effects and seasonality in mental health. However, the size of the effect declines in 2021 and 2022 as vaccination rates rise. For women and college educated men having a vaccine improved mental health. However, being vaccinated worsens mental health among less educated men.
Journal Article