Yale School of Management

Posts by SME Direct Lending

Congress Expands Support to Small Businesses

April 24, 2020

On April 23, the U.S. Congress passed emergency legislation to appropriate an additional $310 billion for the Paycheck Protection Program (PPP), $50 billion for Economic Injury Disaster Loans (EIDL), and $10 billion for EIDL Emergency Advances. Congress created the PPP and EIDL Emergency Advance programs on March 27 in the CARES Act.

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Lessons Learned in Designing and Implementing Support for Small Businesses

April 24, 2020

One month into the biggest global bailout of small businesses in history, countries have started to adjust their initial programs to make them more effective. Small and medium sized enterprises (SMEs) account for 90 percent of businesses and a majority of employment opportunities across the world. Even during non-crisis times, many SMEs face constraints in accessing financing. Governments are working to provide exceptional support during the COVID-19 pandemic in order to prevent bankruptcies, unemployment, and a deeper recession.

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Large-Scale Assistance Programs for Small Businesses

April 8, 2020

With the economic effects of the coronavirus pandemic likely to be particularly devastating for small and medium-sized enterprises (SMEs), countries around the globe are faced with the task of determining how best to support such businesses.  A number of potential intervention types exist and are already being deployed, many of which have also been used in response to earlier financial crises. This post begins by describing the fundamental challenge: to provide SME assistance quickly and on a large scale.  It next examines each of the primary tools governments can use to extend assistance to SMEs on such a scale. In so doing, it provides examples of the use of these tools drawn from the current situation and previous crises. The post then presents a detailed analysis of the framework for SME assistance established in the United States by the recently adopted CARES Act as one example of how interventions can be combined to support SMEs.  It concludes by offering some takeaways about why certain SME assistance interventions may be preferable to others in given contexts.

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Asian Development Bank Increases Funds for Producers of Critical Medical Supplies

April 8, 2020

On March 12, the Asian Development Bank (ADB) said it would make $200 million available to companies that make and distribute medicines and medical supplies to fight the coronavirus.

The ADB will disburse this aid through its Supply Chain Finance Program, which was originally developed in 2012 to “unlock financial resources caught in the supply chain.” Suppliers were sometimes waiting for up to six months to receive payment from buyers, and the SCFP provides short-term funding so they don’t have to wait (see here, pp. 3).

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Direct Lending to SMEs - Canada’s Business Credit Availability Program

March 25, 2020

Canada has reintroduced a program from the Global Financial Crisis of 2007-09 to provide government loans directly to small businesses to help them deal with the economic consequences of the COVID-19 pandemic. 

Countries across the world are adopting measures to support small and medium-sized enterprises (SMEs) during the COVID-19 crisis. They often use credit guarantees to facilitate lending to SMEs by guaranteeing their bank loans. This post discusses a less common tool, direct governmental lending to SMEs, illustrated by Canada’s programs both during the Global Financial Crisis, and today.

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