Does Fintech Substitute for Banks? Evidence from the Paycheck Protection Program

Abstract

We would like to thank René Stulz, Tejaswi Velayudhan, Daniel Green, Greg Howard, Victor Lyonnet for very helpful comments. Thanks to May Zhu for excellent research assistance. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Who Supplies PPP Loans (and Does It Matter)? Banks, Relationships, and the COVID Crisis

“…Cororaton and Rosen (2020) also study publicly traded firms and find that smaller public firms with more employees, fewer investment opportunities, and COVID-19 exposure are more likely to borrow from PPP funds. Erel and Liebersohn (2020) find that borrowers in areas with fewer bank branches, lower incomes, and more minority populations are more likely to access PPP funds via financial technology (fintech) firms rather than banks. 6 A number of studies show that small community banks provide an outsized share of PPP loans (Balyuk et al (2020), Faulkender et al (2020), and James, Lu, and Sun (2020).…”

Who Supplies PPP Loans (And Does it Matter)? Banks, Relationships and the COVID Crisis

“…Cororaton and Rosen (2020) also study publicly traded firms and find that smaller public firms with more employees, fewer investment opportunities, and COVID-19 exposure are more likely to borrow from PPP. Erel and Liebersohn (2020) find that borrowers in areas with fewer bank branches, lower incomes, and more minority population are more likely to access PPP via FinTech firms rather than banks. A number of studies show that small, community banks provide an outsized share of PPP loans (Balyuk (2020), Faulkender et al (2020), James et al (2020)).…”

Banking Research in the Time of COVID-19

“…Several studies find that small, community banks played an outsized role in PPP, disbursing outsized shares of the PPP loans (e.g., Levine, Lin, and Xie, 2020;James, Lu, and Sun, 2021). Another study finds that FinTech firms also played a key role in distributing PPP funds, providing greater roles in local markets with fewer bank branches, lower incomes, larger minority shares of the population, in industries with bank small business lending (Erel and Liebersohn, 2020).…”