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 associated with a substantial increase in average SME lending growth lasting long after bank exposures to PPP loans had been largely eliminated. We do observe some retrenchment in SME lending exposure at sample-end associated with earlier PPP-related lending expansion, but the net long-term impact on SME lending remains positive. 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 participation in the PPP and PPPLF programs fostered persistent SME banking relationships, despite the reduced incentives for forming such relationships under government lending guarantees.
Suggested citation:
Dufresne, Lora and Mark M. Spiegel. 2026. “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