Commercial Financing Disclosure Laws and Nonbank Lending: Who Benefits and Who Suffers?

Yuna Heo and Steven Ongena
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Yuna Heo: University of Basel - Faculty of Business and Economics; Swiss Finance Institute
Steven Ongena: University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

No 26-51, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Commercial Financing Disclosure Laws (CFDL) are state-level regulations that require nonbank lenders to provide transparent disclosures to small businesses when granting them credit. This study documents that nonbank lenders decrease interest rates and increase loan amounts for borrowers following the enactment of CFDL. The effects are more pronounced for marginal borrowers, such as startups and franchise entrepreneurs. Yet small business loans exempt from CFDL mandates experience a higher cost of credit and a reduction in lending volume. Those loans are also more likely to default. Overall, this study suggests that, while CFDL helps curb potential predatory practices by forcing transparency in small business lending, nonbank lenders pass on compliance costs on to less-regulated entities.

Keywords: commercial financing disclosure laws; CFDL; small business lending; credit supply (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2026-07, Revised 2026-09
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