Does government intervention in the small-firm credit market help economic performance?

RePEc Short ID: pcr197
ORCID iD: 0000-0003-0667-1422

Craig, Ben R.; Jackson, William E.; Thomson, James B.

Discussion Paper

Does government intervention in the small-firm credit market help economic performance?

Abstract: The guaranteed lending programs of the Small Business Administration (SBA) are large and growing rapidly. The SBAs fiscal year 2008 performance budget calls for $25 billion in guaranteed loans for small businessesa new record for the agency. Some critics of SBA programs suggest they do not help small businesses or overall economic performance. Other critics suggest that these programs unfairly benefit the financial institutions that participate in SBAs guaranteed lending programs. While very little serious empirical evidence exists on whether the net economic impact of the SBAs guaranteed lending programs is positive or negative, a few recent studies provide some insight into the question. In general, they suggest a small positive impact of the SBAs programs on economic performance. However, the results are very tentative and further research is needed to declare a more definitive position. We provide a general overview of the SBAs guaranteed lending programs and summarize the results of these studies.

Keywords: Small Business Administration; Economic development; small business finance;