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
Date Written: June 2018
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: Suggested Citation