Bank Relationships and the Geography of PPP Lending

David Glancy

No 2023-014, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: I study how bank relationships affected the timing and geographic distribution of Paycheck Protection Program (PPP) lending. Half of banks' PPP loans went to borrowers within 2 miles of a branch, mostly driven by relationship lending. Firms near less active lenders shifted to fintechs and other distant lenders, resulting in delays receiving credit but only slightly lower loan volumes. I estimate a structural model to fit the observed relationship between branch distance, bank PPP activity, and origination timing. I find that banks served relationship borrowers 5 to 9 days before other borrowers, an effect in line with reduced-form estimates using a sample of PPP borrowers with previous SBA lending relationships.

Keywords: Banks, credit unions, and other financial institutions; COVID-19; Paycheck Protection Program (PPP); Relationship Lending (search for similar items in EconPapers)
JEL-codes: G21 G28 G38 H25 (search for similar items in EconPapers)
Pages: 45 p.
Date: 2023-02-16
New Economics Papers: this item is included in nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2023-14

DOI: 10.17016/FEDS.2023.014

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