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

43 Pages Posted: 14 Jun 2021 Last revised: 30 Jun 2021

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

Multiple version iconThere are 2 versions of this paper

Date Written: February, 2021

Abstract

Has information technology improved small businesses' access to credit by hardening the information used in loan underwriting and reducing the importance of proximity to lenders? Previous research, pointing to increasing average lending distances, suggests that it has. But this conclusion can obscure differences across loans and lenders. Using over 20 years of Community Reinvestment Act data on small business lending, 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.

JEL Classification: R21, G21, G38, L25

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 (February, 2021). FEDS Working Paper No. 2021-011, Available at SSRN: https://ssrn.com/abstract=3865407 or http://dx.doi.org/10.17016/FEDS.2021.011

Robert M. Adams (Contact Author)

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

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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