Defaults on government guaranteed loans by potential high growth firms: Evidence from the COVID-19 period

• Challenger banks experienced higher default rate compared to traditional banks. • Crowdfunding investors are associated with higher default rate than others. • Loans issued under Bounce Back Loan Scheme are riskier compared to other schemes. Equity finance is used to fund innovative and growth-oriented businesses because of its resilience during economic downturns and investors' willingness to undertake higher risks compared to other financing. During the pandemic, 6500 equity-funded firms obtained government-guaranteed loans from traditional banks and new lenders. Our analysis of the determinants of loan default revealed that new lenders experienced a significantly higher default rate than the main banking sector. Additionally, firms funded by equity crowdfunding have a higher loan default rate than those backed by other equity providers. We explore the factors influencing defaults and variations by lender and investor type.