After the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters

Benjamin Collier, Sabrina T. Howell and Lea Rendell

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Does emergency credit prevent long-term financial distress? We study the causal effects of government-provided recovery loans to small businesses following natural disasters. The rapid financial injection might enable viable firms to survive and grow or might hobble precarious firms with more risk and interest obligations. We show that the loans reduce exit and bankruptcy, increase employment and revenue, unlock private credit, and reduce delinquency. These effects, especially the crowding-in of private credit, appear to reflect resolving uncertainty about repair. We do not find capital reallocation away from neighboring firms and see some evidence of positive spillovers on local entry.

Keywords: Financing frictions; natural disasters; climate change adaptation; entrepreneurship; government credit (search for similar items in EconPapers)
JEL-codes: G21 G32 H81 Q54 R33 (search for similar items in EconPapers)
Pages: 86 pages
Date: 2024-04
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-env, nep-fdg and nep-sbm
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:24-20

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