What the Rescue Loan Did to Firm Leverage

For Chilean firms, the important balance-sheet question is what happened after a guaranteed loan was approved: did the program merely replace another source of credit, or did it add debt to a firm already facing an uncertain recovery? This chapter follows the debt position through participation, grace-period borrowing, and the later distinction between guaranteed and ordinary credit. It also shows why the answer changes with the margin and the level of analysis. A firm can add both kinds of debt, a riskier borrower can substitute one for the other while still becoming more leveraged, and the aggregate credit market can display a different pattern from the firms inside the program.

The debt increase was large relative to where firms started

The study measures the change in a firm's net outstanding bank debt during 2020 and normalizes it by the firm's 2019 sales. That normalization matters. Sales fell for many firms during the pandemic, so dividing the debt change by current-year sales could make leverage appear to rise simply because the denominator collapsed. Using 2019 sales asks a more stable question: how much did the firm's bank debt change relative to its pre-pandemic operating scale?

The comparison is between firms that used the credit program and firms that did not, with the analysis controlling for risk, sales growth, industry, and municipality. Among firms with previous loans, users increased their debt by 14.5 percentage points more than non-users. Among firms without previous loans, the corresponding increase was 13.0 percentage points. These are percentage-point changes in the debt-to-2019-sales measure, not claims that debt rose by 14.5 or 13.0 percent. The scale becomes clearer against the starting points: the initial leverage ratio was 29 percent for firms with previous loans and zero for firms without previous loans by construction.

For a firm with an existing loan book, the program therefore represented a material additional claim relative to sales. For a firm without prior bank debt, it opened a relationship that had not previously appeared in the bank-debt measure. In both cases, the result is consistent with the program doing what a liquidity facility is meant to do—making more borrowing possible—but it also means the firm carried a larger repayment obligation into an uncertain recovery. The paper's descriptive result does not by itself say whether that added debt financed productive survival or prolonged an unviable business. It establishes the balance-sheet channel through which the policy could have either effect. The distinction between levels and ratios is important here. A 14.5-percentage-point increase is measured relative to 2019 sales; it is not a 14.5 percent return on borrowed funds, nor does it reveal how the money was spent. For firms with no prior bank debt, the result indicates a new debt relationship relative to a zero starting balance. For firms that already borrowed, it indicates an additional burden on top of an existing claim. The same numerical change can therefore carry different repayment implications across the two groups.

The grace period further separates the moment of borrowing from the moment of repayment. A higher outstanding balance during 2020 can reflect a new guaranteed loan, slower repayment of ordinary debt, or both.