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Using supervisory data on small and midsized nonfinancial enterprises (SMEs), we find that those SMEs with higher leverage faced tighter constraints in accessing bank credit after the COVID‐19 outbreak in spring 2020. Specifically, SMEs with higher pre‐COVID leverage obtained a smaller volume of new loans and had to pay a higher spread on them during the pandemic period. Consistent with an inward shift in loan supply, these effects were concentrated in loans originated by banks with below‐median capital buffers. Highly levered SMEs that relied on low‐capital large banks for funding before the pandemic were not able to substitute to other sources of debt financing and thus experienced more of a reduction in total debt as well as a decline in investment and employment. On the other hand, the unprecedented public support, especially the Paycheck Protection Program (PPP), mitigated the adverse real effect stemming from bank credit constraints. [ABSTRACT FROM AUTHOR]

Peer-to-peer lending, a novel element of Internet finance that links lenders and borrowers via online platforms, has generated large profits for investors. However, borrowers' missed payments have negatively impacted the industry's sustainable growth. It is imperative to create a system that can correctly predict loan defaults to lessen the damage brought on by defaulters. The goal of this study is to fill the gap in the literature by exploring the feasibility of developing prediction models for P2P loan defaults without relying heavily on personal data while also focusing on identifying key variables influencing borrowers' repayment capacity through systematic feature selection and exploratory data analysis. Given this, this study aims to create a computational model that aids lenders in determining the approval or rejection of a loan application, relying on the financial data provided by applicants. The selected dataset, sourced from an open database, contains 8578 transaction records and includes 14 attributes related to financial information, with no personal data included. A loan dataset is first subjected to an in-depth exploratory data analysis to find behaviors connected to loan defaults. Subsequently, diverse and noteworthy machine learning classification algorithms, including Random Forest, Support Vector Machine, Decision Tree, Logistic Regression, Naïve Bayes, and XGBoost, were employed to build models capable of discerning borrowers who repay their loans from those who do not. Our findings indicate that borrowers who fail to comply with their lenders' credit policies, pay elevated interest rates, and possess low FICO ratings are at a higher likelihood of defaulting. Furthermore, elevated risk is observed among clients who obtain loans for small businesses. All classification models, including XGBoost and Random Forest, successfully developed and performed satisfactorily and achieved an accuracy of over 80%. When the decision threshold is set to 0.4, the best performance for predicting loan defaulters is achieved using logistic regression, which accurately identifies 83% of the defaulted loans, with a recall of 83%, precision of 21% and f1 score of 33%. [ABSTRACT FROM AUTHOR]

This study analyzes the relationship between the US Small Business Administration (SBA) loan programs and state‐level employment by utilizing a dynamic first‐difference generalized method of moments fixed effects statistical approach using annual data from 1996 to 2013. The US state‐level panel data show a positive relationship between growth rates in SBA lending per capita and states' civilian employment levels. This relationship appears to be stronger in states with below‐average incomes than in states with higher incomes. This study contributes to the understanding of how SBA lending programs can best help foster state‐level economic development and employment. [ABSTRACT FROM AUTHOR]

The authors also conducted structured interviews with PPP loan recipients and found that those businesses that received smaller-reported loan amounts had more difficulties and less knowledge about the loan application process than larger loan recipients. They compare PPP lending to existing residential and small business lending patterns to assess the disadvantage of Black and Latinx neighborhoods in receiving PPP loans. Keywords: inclusive economic development; paycheck protection program; PPP; inclusivity EN inclusive economic development paycheck protection program PPP inclusivity 207 210 4 09/20/23 20230801 NES 230801 In 2019, the Federal Reserve Bank of Boston, The Initiative for a Competitive Inner City, and the W.E. Upjohn Institute for Employment Research partnered to gain a better understanding of the mechanisms and contexts that promote inclusive economic growth and development. During the first two phases - when approximately 60% of loans and 70% of loan dollars were allocated - majority Black and Latinx neighborhoods received disproportionately fewer PPP loans and dollars. [Extracted from the article]

The Paycheck Protection Program helped to preserve employment relationships during the sudden shutdown of economic activity due to the COVID-19 pandemic. This paper analyzes whether small business owners' race, ethnicity, or gender played a role in the PPP loan amount received. In 2020 and 2021, non-White-, Hispanic-, and female-owned small businesses received smaller PPP loans than their business counterparts of the same size. Larger companies displayed increased discrepancies in loan amounts. From 2020 to 2021, disparities among non-White business owners decreased; however, female and Hispanic owners continued to receive less in PPP loans than male and non-Hispanic owners. Lee bounds estimates show that female-owned businesses in rural counties received smaller PPP loans per employee than female-owned businesses in urban counties. Structural interviews with PPP loan recipients in Northeast Ohio showed that businesses receiving smaller loan amounts had more difficulties and less knowledge about the loan application process compared to larger loans recipients. [ABSTRACT FROM AUTHOR]

This paper analyzes how regulation that promotes greater access to bank credit, such as the Community Reinvestment Act (CRA), impacts the financing of small firms. It finds that when areas become CRA‐eligible, the likelihood of bank lending to local small firms increases and firms reduce late trade credit payments, consistent with loans allowing small firms to pay trade credit more promptly and avoid late payment fees. The effect is more profound in low‐ and moderate‐income areas where financial constraints are tighter due to low bank competition. The effect is also larger for small firms that operate in trade credit‐dependent industries. [ABSTRACT FROM AUTHOR]

Since May 2015 several U.S. Bank Holding Companies (BHCs) have been newly classified as small banks by regulators, thus benefiting from a friendlier regulatory capital environment. Using a difference-in-differences setting, we show that less regulation on small BHCs boosts small business lending of the affiliated commercial banks. We employ various tests to demonstrate that these findings are attributable to a capital channel where increases in lending are driven by the preferential capital treatment granted to the small BHC. The regulatory capital relief also has some positive effects for the local economy. Overall, the effects of the regulatory capital relief for small BHCs are consistent with its desired policy objectives. This paper was accepted by Tomasz Piskorski, finance. [ABSTRACT FROM AUTHOR]

How small-business owners assess uncertainty and risk in the macroeconomic environment to report optimism toward their business activity is an important research question for policymakers and academics alike. Drawing on a monthly optimism index and a variety of uncertainty and volatility (risk) trackers from January 1986 to June 2017, in line with the expectation that business owners dislike uncertainty in economic policy, economic policy uncertainty may lower optimism. Business investment and sentiment volatility, however, contributed positively to optimism. The findings provide preliminary implications for policymakers in targeting indicators salient to the optimism index of small-business owners. [ABSTRACT FROM AUTHOR]

This paper investigates whether innovative Peer-to-Peer lending by FinTechs' has a regulatory advantage over the big banks in respect of small business lending. We do this through the lens of the regulations imposed by the Dodd-Frank Act, using a difference-in-difference methodology. The Act tightened traditional bank credit standards on business loans, especially for small firms. However, the new FinTech lenders were not subject to the same regulatory burden. We find that traditional banks significantly reduced their lending to small businesses, as compared to their FinTech competitors. Our results suggest that while the Dodd-Frank Act constrained lending to small businesses, innovative new lending models gained a regulatory advantage and the Peer-to-Peer lenders capitalized on this. [ABSTRACT FROM AUTHOR]

The article reports that starting in early spring of 2020, the COVID-19 outbreak caused unprecedented widespread disruptions to economic activity that had a significant impact on businesses and state and local municipalities, as well as individuals. To mitigate some of these disruptions and provide relief to entities affected by the economic fallout from the measures to contain COVID-19.

The number of community banks in the United States has been declining steadily for decades, as has the share of total industry assets held by these banks. Because community banks play an outsized role in originating loans to small businesses, a continued decline in their numbers and asset holdings could constrain entrepreneurs' access to credit--and, accordingly, constrain growth in the overall economy. One possible explanation for the declining number of community banks is that larger banks have benefitted from economies of scale and outpaced them in efficiency. Stefan Jacewitz examines how the efficiency of community banks has changed since the 2008 global financial crisis. He finds that community banks have in fact seen substantial improvements in efficiency, partially attributable to a relative decline in their brick-andmortar expenses. His results suggest that community banks have made and continue to make meaningful gains even as the banking landscape evolves. [ABSTRACT FROM AUTHOR]

The reasonable credit scoring model must have strong default identification ability, which means the credit scoring can effectively distinguish between defaulting and nondefaulting customers. The premise to determine the credit score of small enterprises is to determine the weight of indicators. This paper studies 3,045 Chinese small business loans, and two novel weighting methods "Wilks' Lambda method" and "AUC value method" are proposed, The greater the weight they meet, the greater the ability of default identification. The five weighting methods of "Wilks' lambda method," "AUC value method," "G1 method," "entropy method," and "mean square variance method" are compared. An important contribution of the paper is to discover that Wilks' Lambda method is the most effective method for small business. [ABSTRACT FROM AUTHOR]

The problem of attracting financial resources for the growth of small and medium-sized businesses was and remains relevant at all stages of the market economy development, which actualizes market research in the historical context. The article provides a historical retrospective to the problem of the mutual credit societies (MCS) creation and activity in 9 Ukrainian governorates, that were part of the Russian Empire in the second half of the 19th — early 20th centuries. The present paper makes attempt to examine the mechanisms and structure of lending, which was carried out by MCS in general. The objective is to establish the state of MCS’ development in the Ukrainian governorates. The paper also identifies the role of MCS in the lending system that had developed in the second half of the 19th — early 20th centuries in the Russian Empire. It was used several scientific methods which includes an interdisciplinary approach and are characteristic of research in the economic history field. Various historical sources like published statistical data and archival documents and materials were used. The study has found that the establishment and activity of MCS were focused on providing short-term loans to small and medium-sized businesses, that has been operating in governmental and provincial uyezd towns and cities where the banking system was poorly developed. It was carried out the analysis of development dynamic of quantitative and qualitative indicators of MCS activity. It was determined that the MCS share in the credit system of the Russian Empire constituted 5% in 1914. The study has found that rate of the MCS creating practice was influenced by many factors, which were mainly associated with unsuccessful financial reforms, belated legal regulation and weak episodic state support. The change in the structure of the credit-deposit and other operations provided by MCS has been processed. The range of banking services provided by MCS to their members and other clients was investigated. It has been proved the value of the historical experience of MCS crediting and the possibilities of its use to provide financial support for the development of domestic business are outlined. [ABSTRACT FROM AUTHOR]

I investigate how the consolidation of securitization entities under SFAS 166 and 167 spills over to banks' supply of small business loans, which are rarely securitized in the United States. This spillover operates through two channels. (1) In the leverage channel, consolidating banks downsize their entire loan portfolios, both small business loans and other loans, in response to increased leverage after consolidation. (2) In the risk management channel, consolidating banks adjust the mix of loans to maintain optimal diversification. The adjustment can increase the supply of small business loans when their performance covaries positively with the performance of other loans. I find that, on average, banks that consolidate more securitized assets reduce small business lending; consequently, counties with a greater market share of consolidating banks experience slower growth in small businesses. I also identify a small group of banks with sufficiently large positive performance covariance that increase small business lending. Data Availability: All untabulated results are available upon request. JEL Classifications: M4; G21. [ABSTRACT FROM AUTHOR]

The COVID-19 pandemic gravely endangers the health of millions of Americans. Private and public safety measures adopted to reduce infection, however, are also a source of existential risk. As U.S. infection rates increased in early March 2020, unemployment and business dislocation surged. The bipartisan Coronavirus Aid, Relief, and Economic Security Act (CARES Act) represents the first and largest federal attempt to manage economic fallout from the pandemic. The Paycheck Protection Program (PPP) is a lynchpin of the CARES Act. The PPP seeks to mitigate unemployment and closures in several vulnerable sectors of the economy including among tens of millions of small businesses, not-for-profits, and self-employed individuals. The PPP has disbursed over $500 billion to these sectors, providing a lifeline to millions of employees. Nevertheless, media, lawmakers and economists have criticized the PPP for inefficiently or inequitably distributing funds. This Article is the first work of legal scholarship that explains and examines the PPP. As a case study, this Article also provides insight into the design of economic interventions and their limitations, as well as how the lawmaking process generates a narrative allocating responsibility for social trauma. [ABSTRACT FROM AUTHOR]

Agriculture is a primary source of livelihood for more than 75% of the Assam’s population in Northeast India, however 98.9% of farmers belong to the category less than 1 to 2 hectares of land per family in Dibrugarh district of Assam. This research aims at improving livelihood of these farmers through exploring the opportunities and constraints of their resources. The study conducted 250 personal interviews with heads of households of small farmers cultivating rice (the staple food crop) who were chosen by the method of purposive sampling among three villages of Dibrugarh district. The data were collected by personal schedule along with observation, and descriptive statistics were used for data analysis. The results revealed that the main constraints were: irrigation and drainage problems, small size of the agricultural land, lack access to the inputs of production, low productivity, high loss of production, lack of access to finance, lack of practical skills training for modern agriculture and marketing, lack of social organisations. However the key opportunities were: depending on rainfed agriculture, high fertility of the soil, diversification of family income, high demand of the rice in the market, low illiteracy rate, forming a cooperative association and the homogeneity of population, which represents their strong cultural bond. The study concluded some recommendations: offering training and consulting services by the Agricultural Extension agency, establishing a good infrastructure and facilitating soft loans for agriculture and small business. [ABSTRACT FROM AUTHOR]

The article reports on fair lending developments and litigations in the U.S. as of March 2021. Also cited are the voluntary dismissal by the city of Miami, Florida of the fair lending cases filed against four key mortgage lenders, the enforcement actions filed by the Consumer Financial Protection Bureau (CFPB) and Department of Justice (DOJ) due to alleged racial discrimination, and the rulemaking issued by the CFPB for lending to small businesses.

This study contributes to the current body of entrepreneurial finance literature by analyzing multiple aspects of personal guarantees. We conducted a survey yielding 1,462 responses from owners or managers of incorporated small businesses geographically dispersed throughout the United States. Of these, 383 C or S corporations had loans in place during 2014. The survey focuses on personal guarantees used on five types of loans: lines of credit, mortgages, equipment loans, vehicle loans, and a loan type referred to as "other loans." We found the variation increase in personal guarantees for equipment loans, vehicle loans, and other types of loans during the 27 years (1987 - 2014) to be significant with a 95% confidence level, with a 5% margin of error. We found an underinvestment problem (Ang, Lin & Tyler, 1995) exists as 12.5% of owners of incorporated small businesses have decided not to undertake a positive net present value project because the lender required a personal guarantee to obtain a loan for the project. We found lenders denied 10.9% of these 383 corporations a loan resulting in credit rationing because of these corporations' inability to meet the lender's personal guarantee requirements. We found more than 15% of the 383 corporation owners refused the lender's requirement to provide a personal guarantee. Almost 42% of the 15% still received a loan from the same lender after refusing to provide a personal guarantee. We found that only 22.2% of female smallincorporated business owners received a loan after refusing to provide a personal guarantee from the same lender. Compared to 51.4% of the male small incorporated business owners still received the loan after refusing to provide a personal guarantee. Overall, we found that only 37% of the 1,462 incorporated small business respondents had a loan in place during 2014 compared to 67% of incorporated businesses documented by the Federal Reserve Board's 1987 National Survey of Small Business Finances. [ABSTRACT FROM AUTHOR]

Previous research shows that small business lending declined significantly during the Great Recession. In this paper, we examine the effects of small business lending on measures of socioeconomic development in U.S. counties during this time period. Citing literature which shows that small business owners in nonmetropolitan counties depend on traditional bank loans more than their metropolitan counterparts, we propose that the effects of small business lending will be more important in nonmetropolitan counties. We utilize data from Community Reinvestment Act Federal Financial Institutions Examination Council and U.S. Census. We use two measures of small business lending: the average per loan small business lending from 2005-2010 and change in small business lending amount in the county between 2005 and 2010. We find that the per loan average amount of small business lending between 2005-2010 increased the 2010 median family income and 2010 county poverty rate in nonmetropolitan counties. The effects in metropolitan counties show no benefits of small business lending. Change in the amount of business loan had no consistent effects. Implications for existing and future research are discussed. [ABSTRACT FROM AUTHOR]

This research aims to propose a framework for evaluating credit applications by assigning a binary score to the applicant. The score is targeted to determine whether the credit application is 'good' or 'bad' in small business purpose loans. Even tiny performance improvements in small businesses may yield a positive impact on the economy as they generate more than 60% of the value. The method presented in this paper hybridizes the Genetic Algorithm (GA) and the Support Vector Machine (SVM) in a bi-level feeding mechanism for increased prediction accuracy. The first level is to determine the parameters of SVM and the second is to find a feature set that increases classification accuracy. To test the proposed approach, we have investigated three different data sets; UCI Australian data set for preliminary works, Lending Club data set for large training and testing, and UCI German and Australian datasets for benchmarking against some other notable methods that use GA. Our computational results show that our proposed method using a feedback mechanism under the hybrid bi-level GA-SVM structure outperforms other classification algorithms in the literature, namely Decision Tree, Random Forests, Logistic Regression, SVM and Artificial Neural Networks, effectively improves the classification accuracy. [ABSTRACT FROM AUTHOR]

Enacted March 27, 2020, the Paycheck Protection Program (PPP) was the most ambitious and creative fiscal policy response to the pandemic recession in the United States. PPP offers forgivable loans-essentially grants-to businesses with 500 or fewer employees that meet certain requirements. In this paper, we present evidence that PPP has substantially increased the employment, financial health, and survival of small businesses, using data from Dun & Bradstreet, Inc. We use event studies and standard difference-in-differences models to estimate the effect of a small business applying for larger PPP loans and of a small business being eligible for PPP based on size. While our findings are informative, we believe it is too early to issue conclusive judgment on PPP's success. We offer lessons for the future from the PPP experience thus far. [ABSTRACT FROM AUTHOR]

Recent literature questions the relative advantage of community banks vs. non-community banks in small business funding. Using the Federal Deposit Insurance Corporation's definition of a community bank, the study re-examines the role of community banks in providing funding to small businesses using the Community Reinvestment Act (CRA) small business lending data over the period 2003 to 2016. The empirical results indicate that community banks are still providing 30 percent more small business funding than non-community banks, especially after the Great Recession. This role is even more important in those counties in non-metropolitan areas. In addition, the results indicate that in counties where community banks do not have offices, they provide 48 percent fewer loans compared to non-community banks in counties where they do not have offices, which suggests community banks still use physical offices to maintain their relationship lending advantage. Clearly, from a public policy standpoint, the results support the view that community banks are important because they continue to provide valuable services to small business firms throughout the country. [ABSTRACT FROM AUTHOR]

We use traditional and nontraditional data to measure the collapse and partial recovery of the US labor market from March to early July, contrast this downturn to previous recessions, and provide preliminary evidence on the effects of the policy response. For hourly workers at both small and large businesses, nearly all of the decline in employment occurred between March 14 and 28. It was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job losses in small businesses reflected firms that closed entirely, though many subsequently reopened. Firms that were already unhealthy were more likely to close and less likely to reopen, and disadvantaged workers were more likely to be laid off and less likely to return. Most laid-off workers expected to be recalled, and this was predictive of rehiring. Shelter-in-place orders drove only a small share of job losses. Last, states that received more small business loans from the Paycheck Protection Program and states with more generous unemployment insurance benefits had milder declines and faster recoveries. We find no evidence that high unemployment insurance replacement rates drove job losses or slowed rehiring. [ABSTRACT FROM AUTHOR]

In an attempt to support entrepreneurs, the U.S. Small Business Administration (SBA) offers loans to small firms. The SBA claims that it not only offers capital to small firms, but that it offers services and support to help them build capabilities. This study investigates whether the empirical evidence demonstrates an improvement in four-year survival rates for SBA-aided firms over the general population of small firms, and if there is any correlation between loan size and survival rates. Additionally, the study examines if women and minority-owned SBA-aided small firms (who are a traditionally under-represented demographic) improve their four-year survival rate. The results suggest that small firms that receive SBA loans do improve the four-year survival rate over the general population of small firms. However, loan size was not correlated with higher survival rates. The results also suggest that women-owned small firms experience a similar increase in survival rate, while minority-owned small firms do not receive a statistically significant increase. [ABSTRACT FROM AUTHOR]

The article discusses public purpose finance (PPF), particularly the role of the U.S. federal government as lenders. Also cited are the PPFs used by the government to provide loans to private borrowers in areas like education, small business, agriculture, and education, as well as the importance of PPF in macroeconomics and racial inequality resolution.

Exploiting the heterogeneity in legal constraints on local bank employees' mobility, I show that access to local information influences banks' modes of expansion. As restrictions on interbank labor mobility are relaxed, banks entering a new market establish branches directly instead of acquiring incumbent branches, resulting in a shift of composition of entrants. The treatment effect is strengthened when information asymmetries between local banks and entrants are severe. Furthermore, I find a surge in the volume and a reduction in the rates of local small business loans originated by surrounding incumbent banks after the entry of outside banks, especially after entrants establish new branches. This paper was accepted by Lauren Cohen, finance. [ABSTRACT FROM AUTHOR]

We test whether rural versus urban location, and the amount of social capital present in those locations, influence the performance of Small Business Administration (SBA) 7(a) loans originated between 1984 and 2012. On average, we find that rural loans are about 11% less likely to default than urban loans, and that a standard deviation increase in social capital reduces default by about 5%. Surprisingly, these two effects are largely independent of each other, even though social capital is substantially higher in rural places than in urban places. Our findings advance the small business lending literature and offer insights for a more efficient allocation of SBA funds. [ABSTRACT FROM AUTHOR]

Previous studies of event returns surrounding bank mergers show that banks gain value in megamergers and additional value when they absorb in-market competitors. A portion of these gains has been traced to the increased bargaining power of banks vis-à-vis regulators and other competitors. We demonstrate that increased bargaining power of megabanks adversely affects loan customers of the acquired institution. Wealth losses are greater when loan customers are credit-constrained, the loan customer is smaller, or the acquisition is an in-market deal. These findings reinforce complaints that the ongoing consolidation in banking has unfavorably affected the availability of credit for smaller firms and especially capital-constrainedfirms. [ABSTRACT FROM AUTHOR]

In this paper we report that, although medium-maturity loans originated under the SBA 7(a) loan guarantee program are targeted to small firms that fail to obtain credit through conventional channels, the default experience is comparable to that of a large percentage of loans held by larger commercial banks. We establish that the default behavior of these loans is time sensitive--as a loan seasons, the likelihood of default increases initially, peaks in the second year, and declines thereafter. Using a discrete-time hazard framework, we show that the likelihood of default is conditional on borrower, lender, and loan characteristics, and changes in economic conditions. [ABSTRACT FROM AUTHOR]

We study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity. For our study, we employ detailed contract information from more than 15,000 bank loans to small firms comprising the entire loan portfolio of a large Belgian bank. We report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending. Loan rates decrease with the distance between the firm and the lending bank and increase with the distance between the firm and competing banks. Transportation costs cause the spatial price discrimination we observe. [ABSTRACT FROM AUTHOR]