Journal Article

The quantity and character of out-of-market small business lending

Abstract: Most small business lending from banks originates with institutions that have a local branch, but out-of-market lending does not. Supporting the view that proximity is conducive to lending, I find that only about 10 percent of small business lending is from banks with no branch in the local market. About half of this appears to be from banks with a branch in the same state, further supporting the role of proximity, while, at the same time, supporting the current regulatory practice of considering out-of-market loans when assessing local competitive conditions. I also find that out-of-market and in-market loans are of similar average size and are about equally likely to be secured by commercial real estate.

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Economic Review

Publication Date: 2008

Pages: 31-39