Financial Crises and Filling the SME Credit Gap: The Role of Government-Guaranteed Loans

51 Pages Posted: 30 Nov 2016 Last revised: 22 Jun 2018

See all articles by John Hackney

John Hackney

University of South Carolina - Department of Finance

Date Written: June 2018

Abstract

This paper investigates whether the presence of government-guaranteed lenders helps alleviate SME financial constraints during financial crises when financial constraints are severe. The results indicate that areas with a greater proportion of Small Business Administration 7(a) lender branches experienced higher small business loan volume and small firm employment during the recent financial crisis, and also lower loan default rates. IV analysis utilizing program characteristics that determine SBA lending intensity confirms the baseline results. The findings suggest that targeted government SME support can play a beneficial role in the recovery of local regions in the presence of private credit market frictions.

Keywords: Small Business, Financial Crisis, Financial Constraints, Government-Guaranteed Lending

JEL Classification: G01, G21, G28

Suggested Citation

Hackney, John, Financial Crises and Filling the SME Credit Gap: The Role of Government-Guaranteed Loans (June 2018). Available at SSRN: https://ssrn.com/abstract=2876653 or http://dx.doi.org/10.2139/ssrn.2876653

John Hackney (Contact Author)

University of South Carolina - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

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