Defaults on government guaranteed loans by potential high growth firms: Evidence from the COVID-19 period

Our Economics Letters paper https://doi.org/10.1016/j.econlet.2024.111941 on equity funded firms is now available online. This paper with and looks at the use of guaranteed loans by potential high growth firms during the Covid period. Equity financing serves as a crucial mechanism for supporting innovative and growth-oriented enterprises, particularly because of its resilience during economic downturns and the propensity of investors to assume higher risks compared to alternative financing methods. During the pandemic, 6,500 government-guaranteed loans were advanced by both traditional banks and emerging lenders to firms predominantly financed through equity. Our comprehensive analysis of loan default determinants revealed that new lenders experienced a significantly higher default rate than established banking institutions. Furthermore, firms financed through equity crowdfunding exhibited a higher loan default rate than those supported by other equity providers. Our study examines the factors influencing loan defaults, with a particular focus on variations attributable to different lender and investor types.
hashtag#venturecapital hashtag#crowdfunding hashtag#covidloans hashtag#default hashtag#creditrisk hashtag#leedsuniversity hashtag#challengerbanks LUBS Accounting and Finance Department Leeds University Business School