Bank Incentives and the Impact of the Paycheck Protection Program

The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did it Go There?

“…First, initial demand for loans significantly exceeded the ability of banks to deliver them. In the face of these capacity constraints, banks appear to have prioritized firms with which they had a pre-existing relationship (Amiram and Rabetti, 2020;Cororaton and Rosen, 2021;Joaquim and Netto, 2021;Granja et al, 2020;Li and Strahan, 2020). Larger firms, which tend to have ongoing banking relationships, accessed PPP funds sooner than smaller firms on average.…”

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

“…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). Bartik, Cullen, Glaeser, Luca, Stanton, Sunderam (2020) use firm survey evidence, finding that firms with strong bank relationships are more likely to receive PPP loans, whereas Joaquim and Netto (2020) provide a theoretical analysis of bank incentives to lend under the program. 7 Our article contributes a new dimension to the literature on relationship banking.…”

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

“…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)). Bartik et al (2020) use firm survey evidence, finding that firms with strong bank relationship are more likely to receive PPP loans, while Joaquim and Netto (2020) provide a theoretical analysis of bank incentives to lend under the program. 4 Our paper contributes a new dimension to the literature on relationship banking.…”