The three essays in this dissertation all focus on small business lending policies in the U.S. and make several unique contributions to the literature. The first essay provides a national overview of the small business sector; it focuses on establishment and employment trends, contributions to the national and local economy, major obstacles to small businesses (access to capital, in particular), and various governmental programs for small business lending.

With a focus on the Small Business Administration (SBA)’s lending programs, the second essay examines whether SBA lending has a larger impact on counties with lower-income communities and/or those where the proportion of the black or Hispanic population is higher. Using a first-differenced two-stage least squares approach, this study finds consistent evidence that an increase in SBA loans has a positive effect on employment in lower-income counties, particularly where the proportion of the black population is higher. The findings support the credit-rationing argument that less developed financial markets such as those in lower-income or minority-concentrated communities should receive relatively higher benefits from governmental interventions in small business credit markets.

The final essay links two different but closely related policies—the Community Reinvestment Act (CRA) and SBA lending programs—and evaluates how the CRA influences SBA lending activity across and within the U.S. seven metropolitan areas. The CRA is a 1977 federal law that encourages depository institutions to meet the credit needs of low- to moderate-income (LMI) neighborhoods whose median family income is less than 80% of the area’s median family income. By taking advantage of this 80% or less income threshold, this study uses a regression discontinuity design. The overall results suggest that the CRA has an insignificant or (at best) a modest impact on SBA lending in LMI neighborhood, although there were some variations across central city, inner-ring suburbs and outer-ring suburbs in the metropolitan areas.

Taken together, the three essays in this collection provide a comprehensive and nuanced understanding of small business lending programs in the U.S. Also, they provide important insights that may assist policy makers in tailoring SBA programs based on communities’ characteristics in a changing financial landscape.