Working Papers

2021-10 | April 2021


Small Business Lending Under the PPP and PPPLF Programs


We examine the effects of the Paycheck Protection Program (PPP) and the PPP Liquidity Facility (PPPLF) on small business lending. The PPP was launched under the CARES Act of March 2020 to provide support for small businesses under the COVID-19 pandemic, while the PPPLF was an affiliated program administered by the Federal Reserve to facilitate the maintenance of liquidity among banks participating in the PPP. We use Call Report data to examine the contributions of these two programs on small business and farm lending by individual commercial banks in the United States. As participation in the programs was associated with lending to small businesses directly, we use an instrumental variables (IV) approach to identify a causal effect of the programs on lending based on historical bank relationships with the Small Business Administration that administered the PPP. Our results suggest that both the PPP and the PPPLF had a marked positive effect on growth in small business and farm lending over the first half of 2020. However, while the PPP seemed to encourage greater lending growth by banks of all asset sizes, only small- and medium-sized bank lending was significantly influenced by participation in the PPPLF. We also find that while both programs had significant positive effects on small business lending, they did not influence small loans to farms over this period, which is likely due to a structural feature of the PPP. Finally, while participation in both programs increased bank balance sheets, we find that risk-adjusted bank capital ratios actually improved with PPP and PPPLF participation.

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Article Citation

Lopez, Jose A, and Mark M. Spiegel. 2021. "Small Business Lending Under the PPP and PPPLF Programs," Federal Reserve Bank of San Francisco Working Paper 2021-10. Available at