We examine the longer-term effects of the Paycheck Protection Program (PPP) and the PPP Liquidity Facility (PPPLF) on small business (SME) lending using bank-level Call Report data. To identify a causal impact, we instrument for PPP and PPPLF lending based on pre-existing relationships with the Small Business Administration and the Federal Reserve discount window. Elevated bank participation in both programs is positively associated with a substantial increase in average SME lending growth lasting long after banks exposures to PPP loans had been largely eliminated. Splitting samples by size, PPP participation persistently increased SME lending by large and small banks, but persistent PPPLF program effects were limited to small banks. Our results suggest that the PPP fostered SME banking relationships, despite the reduced incentives for forming such relationships under government lending guarantees.
Suggested citation:
Dufresne, Lora and Mark M. Spiegel. 2025. “Persistent Effects of The Paycheck Protection Program and the PPPLF On Small Business Lending.” Federal Reserve Bank of San Francisco Working Paper 2024-26. https://doi.org/10.24148/wp2024-26