Date of Award

2010

Degree Type

Dissertation

Department

Nance College of Business Administration

First Advisor

Reichert, Alan

Subject Headings

Small business -- United States -- Finance, Bank loans -- United States, Loans -- United States -- Government guarantee, Loan guarantee, Delinquency, Terms of lending, Bank relationship, Collateral

Abstract

This is a three-part dissertation, which provides a multi-faceted examination of loans and lending to small businesses in the US, which are a key source of economic and job growth. From a broad perspective, this work shows the interplay among various terms of lending, marked differences in lender behavior based on size and type, and a significant role of multiple loans/lenders in explaining loan delinquencies. Essay 1 examines the role of loan guarantees in lines of credit grated to small businesses. The presence of a loan guarantee is associated with lower interest rates and smaller lines of credit. There is some evidence that loan guarantees and collateral are substitutes. Firms with longer banking relationships and fewer banking relationships are less likely to have loan guarantees applied. Since there is some evidence of simultaneity in the data, appropriate econometric procedures are used to obtain consistent parameter estimates. Essay 2 examines differences in terms of lending among two sizes of banks and farm lenders for small loans. Large farm lenders do use more collateral than large bank lenders, but small banks use more collateral than small farm lenders. There is evidence that small banks use more collateral than large banks. All farm lenders appear to use similar levels of collateral, whereas small banks use more collateral than large banks. The determinants of collateral differ based on lender characteristics. For all sizes of farm lenders, the shorter the term of the loan, the more likely the use of non-real estate collateral, and vice versa. Essay 3 examines the determinants of farm loan delinquencies, and in particular, the influence of multiple loans and multiple lenders on delinquency. The number of lenders used by a borrower, the number of loans, and the product of the two are all positively related to loan delinquency. These factors are at least as significant as standard financial ratios in explaining loan delinquency. The most consistent finding regarding farm borrower delinquency is that

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