States have been adopting a variety of economic intervention strategies intended to stimulate growth in the small business sector. This study uses an interrupted time-series analysis to test the hypothesis that growth in the small business establishment sector of a state's economy can be stimulated and sustained when lender commitment programs are in effect. These state-initiated loan packages are designed to extend the availability of capital to potential employment-generating enterprises by diffusing the risk among lenders and having the state assume a share of it. The findings provide only mixed support for this hypothesis. There is evidence that the programs do raise the level of economic activity in the short run, but a diminished rate of growth in small business establishments over time is also observed.
