Business Microloans for U.S. Subprime Borrowers
50 Pages Posted: 6 Oct 2012 Last revised: 13 Apr 2016
Date Written: 2016
We show that business microloans to U.S. subprime borrowers have a very large impact on subsequent firm success. Using data on startup loan applicants from a lender that employed an automated algorithm in its application review, we implement a regression discontinuity design assessing the causal impact of receiving a loan on firms. Startups receiving funding are dramatically more likely to survive, enjoy higher revenues and create more jobs. Loans are more consequential for survival among subprime business owners with more education and less managerial experience.
JEL Classification: G32, L26, M13
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