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
Date Written: November 24, 2020
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: Suggested Citation