Can Bank Density Provide Insights on the Appropriation of Disaster Relief Funds? Evidence from the Paycheck Protection Program

Abstract

In response to the COVID-19 pandemic, Congress in conjunction with the Small Business Administration (SBA) created the Paycheck Protection Program (PPP) to help small business owners retain employees. We improve on previous literature exploring the relationship between bank density and PPP loan dispersion by implementing precisely geocoded data to map loans to commuting zones. Revisiting results in Deming and Weiler (2023), we confirm the statistically significant relationship between bank density and PPP loans per small business. We consider three distinct periods of lending to analyze how changes in the PPP loan program rules might have impacted dispersion. The coefficient in the regression of loans per small business on bank density is largest in the final wave of lending, and in commuting zones with high loan densities. This suggests that having additional bank branches in the commuting zone may have helped facilitate rapid dispersion of relief funds to high demand areas during the program.