Bank Relationships and the Geography of PPP Lending

David Glancy ()
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David Glancy: Federal Reserve Board of Governors

Journal of Financial Services Research, 2025, vol. 67, issue 3, No 4, 157-186

Abstract: 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 two 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 five to nine days before other borrowers, an effect in line with reduced-form estimates using a sample of PPP borrowers with previous SBA lending relationships.

Keywords: Paycheck Protection Program (PPP); Relationship lending; COVID-19; Bank lending (search for similar items in EconPapers)
JEL-codes: G01 G21 G38 H81 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10693-024-00432-y

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