Comparison of Borrowers with SBA and Other Loan Guarantees

摘要

This study compares borrowers holding Small Business Administration (SBA) andpersonal loan guarantees and assesses why lenders recommend SBA loan guarantees rather than personal loan guarantees to some borrowers. It concludes that: High risk borrowers have a higher probability of receiving an SBA loan guarantee than low risk borrowers; Borrowers in high and low concentration markets have similar probabilities of receiving an SBA loan guarantee; High risk borrowers in high concentration markets don't have a higher probability of receiving an SBA loan guarantee than other borrowers. This study supports earlier evidence suggesting that SBA loan guarantees are underpriced to high risk borrowers. Personal loan guarantees are seldom used for high risk borrowers, because lenders have the incentive to recommend SBA loan guarantees.