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Working Paper
Is a Friend in Need a Friend Indeed? How Relationship Borrowers Fare during the COVID-19 Crisis
We analyze loan contract terms, investigating whether relationship borrowers fare better or worse than others in times of need, using the COVID-19 crisis as a quasi-natural experiment. COVID-19 is superior to prior crises for such analysis because its public health and government restrictions shocks directly harm borrowers, rather than banks. Our dataset includes Y-14Q, covering syndicated and non syndicated loans and small and large firms, unlike some other datasets. We find the dark side of relationships dominates across four relationship measures, 14 COVID-19 shocks, and PPP participation. ...
Working Paper
Bank Incentives and the Effect of the Paycheck Protection Program
We assess the role of banks in the Paycheck Protection Program (PPP), a large and unprecedented small-business support program instituted as a response to the COVID-19 crisis in the United States. In 2020, the PPP administered more than $525 billion in loans and grants to small businesses through the banking system. First, we provide empirical evidence of heterogeneity in the allocation of PPP loans. Firms that were larger and less affected by the COVID-19 crisis received loans earlier, even in a within-bank analysis. Second, we develop a model of PPP allocation through banks that is ...
Discussion Paper
Where Have the Paycheck Protection Loans Gone So Far?
The Paycheck Protection Program (PPP) is a central piece of the CARES Act. In the program’s first round, $349 billion in forgivable government-guaranteed loans were extended to small businesses to cover costs related to payroll and utilities, as well as mortgage and rent payments. The program opened for applications on April 3 and was oversubscribed by April 16. Because of its popularity, lawmakers passed a new bill replenishing the fund with another $310 billion and the Small Business Administration (SBA) started approving loans again on April 27. With a new round of PPP lending underway, ...
Discussion Paper
The Paycheck Protection Program Liquidity Facility (PPPLF)
On April 9, 2020, the Federal Reserve announced that it would take additional actions to provide up to $2.3 trillion in loans to support the economy in response to the COVID-19 crisis. Among the measures taken was the establishment of a new facility intended to facilitate lending to small businesses via the Small Business Administration's Paycheck Protection Program (PPP). Under the Paycheck Protection Program Liquidity Facility (PPPLF), Federal Reserve Banks are authorized to supply liquidity to financial institutions participating in the PPP in the form of term financing on a non-recourse ...
Journal Article
Lessons Learned from Small Business Lending During COVID-19: A Case Study of the California Rebuilding Fund
As the COVID-19 pandemic forced California businesses to shut down in March 2020, the fate of small businesses, which often had fewer reserves to draw upon when trying to survive the shutdowns, became particularly concerning. Federal aid measures, including the Paycheck Protection Program (PPP), brought relief to many business owners, but their deployment also confirmed what many small business advocates feared: business owners in the most vulnerable communities and underrepresented business owners often struggled to obtain assistance. At the same time, small business lending capital dried ...
Discussion Paper
Who Received PPP Loans by Fintech Lenders?
Small businesses not only account for 47 percent of U.S employment but also provide a pathway to success for minorities and women. During the coronavirus pandemic, these small businesses—especially those owned by minorities—were hard hit as consumers reduced spending disproportionately on services that require in-person physical interaction, such as hotels and restaurants. In response, the U.S. government launched the Paycheck Protection Program (PPP) to provide guaranteed and potentially forgivable small business loans. In this post, we examine financial technology (fintech) lenders ...
Small Business Lending Gives a Boost to Banks
Small business loans are up 40% at community banks compared with a year ago, spurred on by the Paycheck Protection Program.
Discussion Paper
Did Changes to the Paycheck Protection Program Improve Access for Underserved Firms?
Prior research has shown that many small and minority-owned businesses failed to receive Paycheck Protection Program (PPP) loans in 2020. To increase program uptake to underserved firms, several changes were made to the PPP in 2021. Using data from the Federal Reserve Banks’ 2021 Small Business Credit Survey, we argue that these changes were effective in improving program access for nonemployer firms (that is, businesses with no employees other than the owner(s)). The changes may also have encouraged more applications from minority-owned firms, but they do not appear to have reduced ...
Journal Article
Hires and Separations During the COVID-19 Crisis by Firm Size
The negative effects of the COVID-19 crisis were larger for firms with under 50 employees, even with loans from the Paycheck Protection Program.
Working Paper
Paycheck Protection Program: County-Level Determinants and Effect on Unemployment
This paper uses U.S. county-level data to study the determinants and effects of the Paycheck Protection Program (PPP). The paper first overviews the timeline and institutional aspects of the PPP, implemented in the second quarter of 2020 and worth about $669 billion in forgivable small business loans guaranteed by the Small Business Administration (SBA). It then studies the determinants of the county-level ratios of PPP loans per job lost during the original unemployment surge associated with the onset of the COVID-19 pandemic in late March 2020 and finds that it does not appear to be a major ...