The Economic Impact of the Small Business Administration's Intervention in the Small Firm Credit Market: A Review of the Research Literature*
The views expressed are those of the authors and not those of the Federal Reserve Bank of Cleveland, or the Board of Governors of the Federal Reserve System. We thank Gerald Dwyer, Scott Frame, and Larry Wall for many valuable initial comments. We also thank the Editor (Roy Thurik) and two anonymous referees for many important insights and comments that improved the overall quality of this article. As always, the authors take full responsibility for all errors of omission or commission.
Abstract
The guaranteed lending programs of the Small Business Administration (SBA) are large and growing rapidly. The SBA's fiscal year 2009 Performance Budget calls for $28 billion in guaranteed loans for small businesses—a 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 SBA's guaranteed lending programs. Whereas very little serious empirical evidence exists on whether the net economic impact of the SBA's 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 SBA's 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 SBA's guaranteed lending programs and summarize the results of these studies.
