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Finance and Growth at the Firm Level: Evidence from SBA Loans

J. David Brown () and John Earle ()

No 9267, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We analyze linked databases on all Small Business Administration (SBA) loans, on all SBA lenders, and on all U.S. employers to estimate the effects of financial access on employment growth. Our methods combine regressions with matching on firm age, size, industry, year, and employment history, and with instrumental variables capturing ease of access to SBA lenders. The estimation results imply an increase of 3-4 jobs for each million dollars of loans, suggesting that credit constraints impede small business growth prior to loan receipt. We also investigate the variation in estimated employment effects for the SBA 504 versus 7(a) programs, and with respect to the business cycle, local credit conditions, and within-county versus non-SBA county-industry control firms. Finally, for loans issued over the 1992-2007 period, we estimate total job creation of 1.0-2.1 million and the government's cost per job of $8,200-$18,000 measured five years after the loan year.

Keywords: small business administration; growth; employment; loans; financial access; finance; small business finance (search for similar items in EconPapers)
JEL-codes: D04 G21 G28 H32 H81 J23 L53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-ger and nep-lma
Date: 2015-08
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Forthcoming in: Journal of Finance

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