Bank Lending to Rural vs. Urban Firms in the U.S. Before, During, and After the Great Financial Crisis

70 Pages Posted: 3 Oct 2018

Date Written: July 30, 2018

Abstract

Bank lending to small businesses plummeted during the financial crisis years of 2009 – 2010 (Cole, 2012) and remained at depressed levels through 2015, even as loans to big businesses spiked upwards (Cole, 2018). The current study analyzes data on small-business loan originations at the census-tract level collected by U.S. banking regulators to provide new univariate and multivariate evidence on whether banks made fewer loans to small businesses in rural as compared to urban areas; whether bank lending to small businesses located in rural areas was disproportionately affected by the financial crisis during 2008 – 2010; and, if so, whether such lending recovered during the post-crisis years 2011 - 2016. The analysis reveals that (1) banks did make fewer loans to small businesses in rural as compared to urban areas; (2) rural small businesses were, indeed, disproportionately hurt during the crisis years relative to urban small businesses, which also were hurt, but not as severely; and (3) rural small businesses have seen less of a recovery in lending during the post-crisis years than did their urban counterparts. These findings support efforts by policymakers and bank regulators to boost bank and non-bank small-business lending in rural areas.

Keywords: availability of credit, bank credit, bank lending, credit crunch, discrimination, disparate impact, entrepreneurship, financial crisis, rural, small business, urban

JEL Classification: G01, G21, G28, G32, H25, H8

Suggested Citation

Cole, Rebel A., Bank Lending to Rural vs. Urban Firms in the U.S. Before, During, and After the Great Financial Crisis (July 30, 2018). Available at SSRN: https://ssrn.com/abstract=3247957

Rebel A. Cole (Contact Author)

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
43
PlumX Metrics