Identification of Loan Effects on Personal Finance : A Case for Small U.S. Entrepreneurs1

This paper draws information from a micro-lender and a credit bureau to identify causal effects of small loans on financial health of small U.S. business owners. To achieve this, we exploit temporal variations in the loan disbursements and use an estimation strategy that controls for potential biases due to treatment effect heterogeneity. The results suggest that even small loans are effective in generating lasting positive impacts on accepted financial health indicators, such as Vantage Score (Credit Score), Debt-to-Income Ratio, and Credit Utilization Ratio. We obtain similar robust results for subprime and startup borrowers, who are known to face difficulties securing credit