The Big Tech Lending Model

Lei Liu, Guangli Lu and Wei Xiong

No 30160, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: By comparing uncollateralized business loans made by a big tech lending program with conventional bank loans, we find that big tech loans tend to be smaller and have higher interest rates and that borrowers of big tech loans tend to repay far before maturity and borrow more frequently. These patterns remain for borrowers with access to bank credit. Our findings highlight the big tech lender’s roles in serving borrowers’ short-term liquidity rather than their long-term financing needs. Through this model, big tech lending facilitates credit to borrowers underserved by banks without experiencing more-severe adverse selection or incurring greater risks than banks (even during the COVID-19 crisis).

JEL-codes: G23 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fdg, nep-fmk and nep-pay
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