Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273034 
Year of Publication: 
2022
Series/Report no.: 
Working Papers No. 22-13
Publisher: 
Federal Reserve Bank of Boston, Boston, MA
Abstract: 
Using supervisory data on small and mid-sized nonfinancial enterprises (SMEs), we find that those SMEs with higher leverage faced tighter constraints in accessing bank credit after the COVID-19 outbreak in spring 2020. Specifically, SMEs with higher pre-COVID leverage obtained a smaller volume of new loans and had to pay a higher spread on them during the pandemic period. Consistent with an inward shift in loan supply, these effects were concentrated in loans originated by banks with below-median capital buffers. Highly levered SMEs that relied on low-capital large banks for funding before the pandemic were not able to substitute to other sources of debt financing and thus experienced more of a reduction in total debt as well as a decline in investment and employment. On the other hand, the unprecedented public support, especially the Paycheck Protection Program (PPP), mitigated the adverse real effect stemming from bank credit constraints.
Subjects: 
leverage
small business
credit supply
bank capital
JEL: 
G21
G28
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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