Small Bank Financing and Funding Hesitancy in a Crisis: Evidence from the Paycheck Protection Program

74 Pages Posted: 3 Mar 2021 Last revised: 6 Dec 2021

See all articles by Manju Puri

Manju Puri

Duke University - Fuqua School of Business; NBER

Tetyana Balyuk

Emory University - Goizueta Business School

Nagpurnanand Prabhala

The Johns Hopkins Carey Business School

Multiple version iconThere are 3 versions of this paper

Date Written: September 2021

Abstract

We study the delivery of subsidized financing to small firms through the Paycheck Protection Program (PPP). Smaller firms are less likely to gain early PPP access, an effect attenuated in small banks and firms with prior lending relationships. Their more even treatment offers a new rationale, beyond traditional soft information arguments, for why small businesses pair with small banks. We also detect a “funding hesitancy” in PPP uptake by small businesses, partly reflecting their wariness of the extensive, subjective government powers to investigate PPP recipients. We discuss the implications of the results for research and policies on small business financing.

Keywords: Bank Relationships, Covid-19, Coronavirus, Paycheck Protection Program, PPP, SBA, Small Business Lending

JEL Classification: G32, G38, H81, E61

Suggested Citation

Puri, Manju and Balyuk, Tetyana and Prabhala, Nagpurnanand, Small Bank Financing and Funding Hesitancy in a Crisis: Evidence from the Paycheck Protection Program (September 2021). FDIC Center for Financial Research Paper No. 2021-01, Available at SSRN: https://ssrn.com/abstract=3796210 or http://dx.doi.org/10.2139/ssrn.3796210

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

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Durham, NC 27708-0120
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NBER

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Tetyana Balyuk

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Nagpurnanand Prabhala

The Johns Hopkins Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States
+1 410 234 4532 (Phone)

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