growth of promising young firms. A model of liquidity-constrained entrepreneurs suggests that the easing of credit … would bring about. We explore this growth mechanism using a large-scale program to expand the supply of credit to small and … medium enterprises in Brazil. Local credit supply shocks generate greater firm entry but also greater exit with no effect on …

. This fact is robust to numerous controls for credit quality, industry, and business owner characteristics. The heavy … reliance on external debt underscores the importance of well functioning credit markets for the success of nascent business …

, particularly in earnings. I also find evidence of discrimination in the small business credit market. Firms owned by minorities in … discrimination in the credit market by banks …