Findings from Federal Reserve Bank of Boston Yields New Findings on COVID-19 (Did High Leverage Render Small Businesses Vulnerable To the Covid-19 Shock?): Coronavirus – COVID-19

2025 NOV 10 (NewsRx) -- By a News Reporter-Staff News Editor at NewsRx COVID-19 Daily -- Investigators publish new report on Coronavirus - COVID-19. According to news reporting originating from Boston, Massachusetts, by NewsRx correspondents, research stated, “Using supervisory data on small and midsized nonfinancial enterprises (SMEs), we find that those SMEs with higher leverage faced tighter constraints in accessing bank credit after the COVID-19 outbreak in spring 2020. Specifically, SMEs with higher pre-COVID leverage obtained a smaller volume of new loans and had to pay a higher spread on them during the pandemic period.”

Our news editors obtained a quote from the research from the Federal Reserve Bank of Boston, “Consistent with an inward shift in loan supply, these effects were concentrated in loans originated by banks with below-median capital buffers. Highly levered SMEs that relied on low-capital large banks for funding before the pandemic were not able to substitute to other sources of debt financing and thus experienced more of a reduction in total debt as well as a decline in investment and employment.”

According to the news editors, the research concluded: “On the other hand, the unprecedented public support, especially the Paycheck Protection Program (PPP), mitigated the adverse real effect stemming from bank credit constraints.”

This research has been peer-reviewed.

For more information on this research see: Did High Leverage Render Small Businesses Vulnerable To the Covid-19 Shock? Journal of Money, Credit and Banking, 2024;56(6):1367-1403. Journal of Money, Credit and Banking can be contacted at: Wiley, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - http://www.wiley.com/; Journal of Money, Credit and Banking - http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1538-4616)

The news editors report that additional information may be obtained by contacting Falk Brauning, Federal Reserve Bank of Boston, Boston, MA 02210, United States. Additional authors for this research include Jose L. Fillat and J. christina Wang.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1111/jmcb.13118. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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