Nº 22-31: Beyond Proximity. Fintech, Delegation, and the Spatial Dynamics of the Lending by the U.S. Small Business Administration

We examine how delegation-based segmentation practised by the Small Business Administration's (SBA) shapes credit geography, pricing, and processing. We develop a stylized transportation cost model with principal-agent frictions and test the implications using 7(a) loan data from 2011-2019. Banks that obtain the Preferred Lender Program (PLP) status within their delegated authority lend at significantly greater distances and lower loan rates, and disburse loans faster than non-PLP banks. Hence, despite the SBA's fiscal interventions and fintech innovations, geographic segmentation persists. These findings demonstrate how delegation mechanisms systematically shape spatial credit allocation, even within governmentbacked lending programs.