The Professor will present the paper: Revolving Credit to SMEs: the role of Business Credit Cards

Abstract:
We document that small businesses in the US are frequantly excluded from borrowing through traditional term loans or credit lines and rely instead on standardized, high-interest rate business credit cards to meet their financing needs. We develop and estimate a structural model of firms' card demand, utilization, and default choice, accounting for imperfect competition among lenders and the correlation between utilization and default. We find that high rates are primarily explained by markups rather than lender costs. In counterfactual analyses we study the impact of correlated lender cost shocks as well as proposed capital surcharges on undrawn credit limits.