Business Microloans for U.S. Subprime Borrowers

Abstract

We show that business microloans to U.S. subprime borrowers have a very largeimpact on subsequent firm success. Using data on startup loan applicants from alender that employed an automated algorithm in its application review, weimplement a regression discontinuity design assessing the causal impact ofreceiving a loan on firms. Startups receiving funding are dramatically morelikely to survive, enjoy higher revenues, and create more jobs. Loans are moreconsequential for survival among subprime business owners with more educationand less managerial experience.