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Commercial Financing Disclosure Laws and Nonbank Lending: Who Benefits and Who Suffers?

Author

Listed:
  • Yuna Heo

    (University of Basel - Faculty of Business and Economics; Swiss Finance Institute)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

Abstract

Commercial Financing Disclosure Laws (CFDL) are state-level regulations that require nonbank lenders to provide transparent disclosures to small businesses when granting them credit. This study documents that nonbank lenders decrease interest rates and increase loan amounts for borrowers following the enactment of CFDL. The effects are more pronounced for marginal borrowers, such as startups and franchise entrepreneurs. Yet small business loans exempt from CFDL mandates experience a higher cost of credit and a reduction in lending volume. Those loans are also more likely to default. Overall, this study suggests that, while CFDL helps curb potential predatory practices by forcing transparency in small business lending, nonbank lenders pass on compliance costs on to less-regulated entities.

Suggested Citation

  • Yuna Heo & Steven Ongena, 2026. "Commercial Financing Disclosure Laws and Nonbank Lending: Who Benefits and Who Suffers?," Swiss Finance Institute Research Paper Series 26-51, Swiss Finance Institute, revised Sep 2026.
    • Handle: RePEc:chf:rpseri:rp2651
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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