Abstract
We test whether rural versus urban location, and the amount of social capital present in those locations, influence the performance of Small Business Administration (SBA) 7(a) loans originated between 1984 and 2012. On average, we find that rural loans are about 11% less likely to default than urban loans, and that a standard deviation increase in social capital reduces default by about 5%. Surprisingly, these two effects are largely independent of each other, even though social capital is substantially higher in rural places than in urban places. Our findings advance the small business lending literature and offer insights for a more efficient allocation of SBA funds.
JEL Codes
G21, R0, G28
Keywords
Commercial banks, Rural lending, Small business loans, Social capital, SBA
Recommended Citation
Deyoung, Robert; Glennon, Dennis; Nigro, Peter J.; and Spong, Kenneth
(2019)
"Small Business Lending and Social Capital: Are Rural Relationships Different?,"
The Journal of Entrepreneurial Finance:
Vol. 21:
Iss.
2.
DOI: https://doi.org/10.57229/2373-1761.1371
Available at:
https://digitalcommons.pepperdine.edu/jef/vol21/iss2/4
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial 4.0 License
Included in
Entrepreneurial and Small Business Operations Commons, Finance Commons, Finance and Financial Management Commons
