Sometimes. But it turns out that lenders are bad at figuring out which businesses will benefit
Small businesses often seek out loans to invest in, say, staffing, real estate, or research. Would some of those businesses benefit from access to additional capital in the form of larger loans? And, if so, can banks predict which businesses would put that extra capital to good use?These are important questions for both the businesses and the larger economy, which relies heavily on small businesses as an engine for growth. So Dean Karlan, Kellogg professor of economics and finance, and research collaborators Gharad Bryan of the London School of Economics and Adam Osman of the University of Illinois, set out to look for answers.
[This article has been republished, with permission, from Kellogg Insight, the faculty research & ideas magazine of Kellogg School of Management at Northwestern University]