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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle
Allen N. Berger and Gregory F. Udell

Abstract: We examine the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small business finance,and how capital structure varies with firm size and age. The interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment. We also analyze a number of research and policy issues, review the literature, and suggest topics for future research.

Keywords: Venture capital, small business lending, bank, mergers

Full paper (4077 KB PDF)

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Last update: April 21, 1998