Is Lending Distance Really Changing? Distance Dynamics and Loan Composition in Small Business Lending

34 Pages Posted: 12 Jun 2020 Last revised: 25 Nov 2020

See all articles by Robert M. Adams

Robert M. Adams

Board of Governors of the Federal Reserve System

Kenneth P. Brevoort

Board of Governors of the Federal Reserve System

John C. Driscoll

Board of Governors of the Federal Reserve System

Date Written: November 24, 2020

Abstract

Has information technology improved small businesses' credit access by hardening the information used in loan underwriting and reducing the importance of lender proximity? Previous research, pointing to increasing average lending distances, suggests that it has. Using over 20 years of Community Reinvestment Act data, we find that while average distances have increased substantially, distances at individual banks remain unchanged. Instead, average distance has increased because a small group of lenders specializing in high-volume, small-loan lending nationwide have increased their share of small business lending by 10 percentage points. Our findings imply that small businesses continue to depend on local banks.

Keywords: Small Business Lending, Community Reinvestment Act, Hard Information

JEL Classification: R21

Suggested Citation

Adams, Robert M. and Brevoort, Kenneth and Driscoll, John C., Is Lending Distance Really Changing? Distance Dynamics and Loan Composition in Small Business Lending (November 24, 2020). Available at SSRN: https://ssrn.com/abstract=3604308 or http://dx.doi.org/10.2139/ssrn.3604308

Robert M. Adams

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2653 (Phone)

Kenneth Brevoort

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

John C. Driscoll (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/john-c-driscoll.htm

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