Bank Relationships and the Geography of PPP Lending

45 Pages Posted: 11 May 2023

See all articles by David Glancy

David Glancy

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: February, 2023

Abstract

I study how bank relationships affected the timing and geographic distribution of Paycheck Protection Program (PPP) lending. Half of banks' PPP loans went to borrowers within 2 miles of a branch, mostly driven by relationship lending. Firms near less active lenders shifted to fintechs and other distant lenders, resulting in delays receiving credit but only slightly lower loan volumes. I estimate a structural model to fit the observed relationship between branch distance, bank PPP activity, and origination timing. I find that banks served relationship borrowers 5 to 9 days before other borrowers, an effect in line with reduced-form estimates using a sample of PPP borrowers with previous SBA lending relationships.

Keywords: Banks, credit unions, and other financial institutions, COVID-19, Paycheck Protection Program (PPP), Relationship Lending

JEL Classification: G38, G21, G28, H25

Suggested Citation

Glancy, David, Bank Relationships and the Geography of PPP Lending (February, 2023). FEDS Working Paper No. 2023-14, Available at SSRN: https://ssrn.com/abstract=4438768 or http://dx.doi.org/10.17016/FEDS.2023.014

David Glancy (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

HOME PAGE: http://sites.google.com/view/davidglancy

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