Commercial lending distance and historically underserved areas

We document a substantial and accelerating increase in the distance between small business borrowers and their lenders during the 1990s, based on a large random sample of U.S. Small Business Administration loans. Importantly, this increase was disproportionately large for borrowers located in low-income and minority neighborhoods. These phenomena are coincident in time with the adoption of credit scoring models, and we find indirect evidence consistent with this link. Our results suggest that automated lending processes have facilitated lender entry into local markets and have, at the margin, increased small business credit access in historically underserved markets.