Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • March 2021
  • Article
  • Journal of Financial Economics

Loan Guarantees and Credit Supply

By: Natalie Bachas, Olivia S. Kim and Constantine Yannelis
  • Format:Electronic
  • | Pages:23
ShareBar

Abstract

The efficiency of federal lending guarantees depends on whether guarantees increase lending supply or simply act as a subsidy to lenders. We use notches in the guarantee rate schedule for Small Business Administration (SBA) loans to estimate the elasticity of bank lending volume to loan guarantees. We show significant bunching in the loan distribution on the side of the size threshold that carries a more generous loan guarantee. The excess mass implies that increasing guarantee generosity by one percentage point of loan principal would increase per-loan lending volume by $19,000. Excess mass increases in periods with guarantee generosity, and placebo results indicate that the effect disappears when the guarantee notch is eliminated.

Keywords

Borrowing and Debt; Financing and Loans; Banks and Banking; Credit

Citation

Bachas, Natalie, Olivia S. Kim, and Constantine Yannelis. "Loan Guarantees and Credit Supply." Journal of Financial Economics 139, no. 3 (March 2021): 872–894.
  • Read Now

About The Author

Olivia S. Kim

Entrepreneurial Management
→More Publications

More from the Authors

    • August 2025
    • Journal of Financial Economics

    Revenue Collapses and the Consumption of Small Business Owners in the COVID-19 Pandemic

    By: Olivia S. Kim, Jonathan A. Parker and Antoinette Schoar
    • 2025
    • Faculty Research

    Precautionary Debt Capacity

    By: Deniz Aydin and Olivia S. Kim
    • 2023
    • Faculty Research

    Trading Off Business and Family Investments: Evidence from U.S. Entrepreneurial Households

    By: Olivia S Kim
More from the Authors
  • Revenue Collapses and the Consumption of Small Business Owners in the COVID-19 Pandemic By: Olivia S. Kim, Jonathan A. Parker and Antoinette Schoar
  • Precautionary Debt Capacity By: Deniz Aydin and Olivia S. Kim
  • Trading Off Business and Family Investments: Evidence from U.S. Entrepreneurial Households By: Olivia S Kim
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College.