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The Contribution of Small Business Loan Guarantees to Economic Development

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  • Ted K. Bradshaw

    (University of California-Davis)

Abstract

Analysis of the outcome of economic development programs is essential for improved public policy. This study reports on the California State Loan Guarantee Program, which guaranteed small business bank loans to carefully selected firms that could not otherwise obtain credit. The study tracked the actual change in employment at 1,166 firms that received 1,515 loan guarantees from 1990 to 1996 during the depths of the California recession. The study found that employment increased in firms receiving loan guarantees by 40% among all firms and 27% among nonagricultural firms. The program also increased state tax revenues by $25.5 million, well in excess of the $13 million the state spent on the program. Firms receiving loan guarantees had a default rate of only 2%.

Suggested Citation

  • Ted K. Bradshaw, 2002. "The Contribution of Small Business Loan Guarantees to Economic Development," Economic Development Quarterly, , vol. 16(4), pages 360-369, November.
    • Handle: RePEc:sae:ecdequ:v:16:y:2002:i:4:p:360-369
    DOI: 10.1177/089124202237199
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    References listed on IDEAS

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    1. repec:rre:publsh:v:35:y:2005:i:3:p:266-90 is not listed on IDEAS
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    3. Vincent Chandler, 2012. "The economic impact of the Canada small business financing program," Small Business Economics, Springer, vol. 39(1), pages 253-264, July.
    4. Low, Sarah A., 2017. "Rural Manufacturing Resilience: Factors Associated With Plant Survival, 1996-2011," Economic Research Report 262184, United States Department of Agriculture, Economic Research Service.
    5. Francesco Reito & Salvatore Spagano, 2014. "A Comparison between Formal and Informal Mutual-credit Arrangements," The Developing Economies, Institute of Developing Economies, vol. 52(2), pages 179-201, June.

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