Evaluating the effects of Small Business Administration lending on growth

Matthew J. Higgins, Donald J. Lacombe, Briana S. Stenard, Andrew T. Young

Research output: Contribution to journalArticlepeer-review

Abstract

Conventional wisdom suggests that small businesses are innovative engines of Schumpetarian growth. However, as small businesses, they are likely to face credit rationing in financial markets. If true, then policies that promote lending to small businesses may yield substantial economy-wide returns. We examine the relationship between Small Business Administration (SBA) lending and local economic growth using a spatial econometric framework and a sample of U.S. counties. We find evidence that a county’s SBA lending per capita is associated with direct negative effects on its income growth. We also find evidence of indirect negative effects on the growth rates of neighboring counties. Overall, a 10% increase in SBA loans per capita is associated with a cumulative decrease in income growth rates of about 0.02 to 0.03 percentage points.

Original languageEnglish
Pages (from-to)23-45
Number of pages23
JournalSmall Business Economics
Volume57
Issue number1
DOIs
StatePublished - Jun 2021

Keywords

  • C23
  • E65
  • Economic growth
  • Entrepreneurship
  • Guaranteed loans
  • H25
  • Income growth
  • L26
  • O47
  • R11
  • Small Business Administration (SBA)
  • Spatial econometrics
  • Spillovers

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