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SBA-loan guarantees and local economic growth

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Listed author(s):
  • Ben R. Craig
  • William E. Jackson
  • James B. Thomson

Abstract

Increasingly policymakers are looking to the small business sector as a potential engine of economic growth. Policies to promote small businesses include tax relief, direct subsidies, and indirect subsidies through government lending programs. Encouraging lending to small business is the primary policy objective of the Small Business Administration (SBA) loan-guarantee program. Using a panel data set of SBA-guaranteed loans we assess whether SBA-guaranteed lending has an observable impact on local and regional economic performance.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0503.

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Date of creation: 2005
Handle: RePEc:fip:fedcwp:0503
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Keywords: Small business ; Economic development ; Loans ; Small Business Administration;

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  1. Stephen Bond & Frank Windmeijer, 2005. "Reliable Inference For Gmm Estimators? Finite Sample Properties Of Alternative Test Procedures In Linear Panel Data Models," Econometric Reviews, Taylor & Francis Journals, vol. 24(1), pages 1-37.
  2. Mitchell A. Petersen & Raghuram G. Rajan, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 407-443.
  3. Cowling, Marc & Mitchell, Peter, 2003. "Is the Small Firms Loan Guarantee Scheme Hazardous for Banks or Helpful to Small Business?," Small Business Economics, Springer, vol. 21(1), pages 63-71, August.
  4. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. "Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, vol. 8(4), pages 297-315, August.
  5. Rebel A. Cole & Lawrence G. Goldberg & Lawrence J. White, 1997. "Cookie-Cutter versus Character: The Micro Structure of Small Business Lending by Large and Small Banks," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-022, New York University, Leonard N. Stern School of Business-.
  6. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
  7. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, 04.
  8. Ben Craig & James Thomson, 2003. "Federal Home Loan Bank Lending to Community Banks: Are Targeted Subsidies Desirable?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 23(1), pages 5-28, February.
  9. Berger, Allen N & Udell, Gregory F, 1992. "Some Evidence on the Empirical Significance of Credit Rationing," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 1047-1077, October.
  10. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-381, July.
  11. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
  12. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  13. Ben R. Craig & William E. Jackson & James B. Thomson, 2004. "On SBA-guaranteed lending and economic growth," Working Paper 0403, Federal Reserve Bank of Cleveland.
  14. White, Lawrence J, 1982. "The Determinants of the Relative Importance of Small Business," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 42-49, February.
  15. Thakor, Anjan V., 2000. "Relationship Banking," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 3-5, January.
  16. Ben R. Craig & James B. Thomson, 2001. "Federal Home Loan Bank lending to community banks: are targeted subsidies necessary?," Working Paper 0112, Federal Reserve Bank of Cleveland.
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Cited by:

  1. DeYoung, Robert & Glennon, Dennis & Nigro, Peter, 2008. "Borrower-lender distance, credit scoring, and loan performance: Evidence from informational-opaque small business borrowers," Journal of Financial Intermediation, Elsevier, vol. 17(1), pages 113-143, January.
  2. Ben R. Craig & William E. Jackson & James B. Thomson, 2007. "On government intervention in the small-firm credit market and its effect on economic performance," Working Paper 0702, Federal Reserve Bank of Cleveland.
  3. Uesugi, Iichiro & Sakai, Koji & Yamashiro, Guy M., 2010. "The Effectiveness of Public Credit Guarantees in the Japanese Loan Market," Journal of the Japanese and International Economies, Elsevier, vol. 24(4), pages 457-480, December.
  4. Allison, Thomas H. & McKenny, Aaron F. & Short, Jeremy C., 2013. "The effect of entrepreneurial rhetoric on microlending investment: An examination of the warm-glow effect," Journal of Business Venturing, Elsevier, vol. 28(6), pages 690-707.
  5. Claire Lelarge & David Sraer & David Thesmar, 2010. "Entrepreneurship and Credit Constraints: Evidence from a French Loan Guarantee Program," NBER Chapters,in: International Differences in Entrepreneurship, pages 243-273 National Bureau of Economic Research, Inc.
  6. Chau-Jung Kuo & Chin-Ming Chen & Chao-Hsien Sung, 2011. "Evaluating guarantee fees for loans to small and medium-sized enterprises," Small Business Economics, Springer, vol. 37(2), pages 205-218, September.
  7. Sherrill Shaffer & Iftekhar Hasan & Mingming Zhou, 2015. "New Small Firms and Dimensions of Economic Performance," Economic Development Quarterly, , vol. 29(1), pages 65-78, February.
  8. Iichiro Uesugi & Koji Sakai & Guy M. Yamashiro, 2006. "Effectiveness of Credit Guarantees in the Japanese Loan Market," Discussion papers 06004, Research Institute of Economy, Trade and Industry (RIETI).

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