Is Lending Distance Really Changing? Distance Dynamics and Loan Composition in Small Business Lending

Some researchers have used increasing small business lending distances to argue that technological changes have reduced banks' reliance on soft information. These studies generally assume distance changes are uniform across loans and lenders. Our paper examines heterogeneity in distance changes. We show that while average distances have increased substantially over the past two decades, individual-bank distances remain unchanged. Instead, average increases are caused by a small number of banks who specialize in very small loans and whose share of lending has grown from 3 to 13%. Outside of these very small loans, small businesses continue to depend on local banks