Structure, Risk, and Access to Credit: Reassessment of the Paycheck Protection Program Effectiveness

TL;DR

This study evaluates the Paycheck Protection Program's impact on U.S. firms, finding modest employment effects but notable improvements in credit risk and financial stability, especially for small-to-medium firms and those with prior credit access.

Contribution

It provides a comprehensive, firm-level analysis of PPP effects using detailed administrative data, highlighting the program's role as a credit and balance-sheet support rather than a major employment booster.

Findings

PPP increased employment by about 0.07%.

Firms experienced a 1.2 to 3.2 point improvement in credit risk rankings.

Longer loan durations amplified positive effects.

Abstract

The Paycheck Protection Program (PPP) was the largest targeted business support program in the United States, yet its firm-level effects remain contested. I link administrative PPP and SBA 7(a) records to a near-universe panel of U.S. employer firms from Dun and Bradstreet, covering roughly 30 million establishments, and evaluate short-run impacts on employment, financial stress, and commercial credit risk. To address non-random take-up, I combine propensity score matching with difference-in-differences on a balanced panel from March to September 2020 and exploit variation in loan holding duration. PPP receipt raises employment by about 0.07 percent on average but improves failure-risk and delinquency-risk percentile rankings by roughly 1.2 and 3.2 points, respectively, with longer loan duration strengthening all three margins. Heterogeneity analysis shows that small-to-medium firms and borrowers with intermediate pre-crisis risk experience the largest gains, while micro firms, very large firms, and highly stressed firms benefit less. Firms without prior 7(a) borrowing relationships realize particularly large credit-score gains. Overall, the evidence indicates that PPP functioned more as a balance-sheet and credit-risk backstop than as a powerful jobs program for the average treated firm. The results highlight how firm structure, pre-crisis financial health, and access to government-backed credit shape the effectiveness of large-scale emergency support.