We show that business microloans to U.S. subprime borrowers have a very large
impact on subsequent firm success. Using data on startup loan applicants from a
lender that employed an automated algorithm in its application review, we
implement a regression discontinuity design assessing the causal impact of
receiving a loan on firms. Startups receiving funding are dramatically more
likely to survive, enjoy higher revenues, and create more jobs. Loans are more
consequential for survival among subprime business owners with more education
and less managerial experience.