Government loan guarantees, venture investment, and SME financing: Cross-country evidence before and after COVID-19

This study examines whether government loan guarantees improve SME financing conditions directly and indirectly through venture investment and whether these relationships changed after the COVID-19 pandemic. Using an unbalanced panel of 40 countries (2007–2022), fixed-effects regression, mediation, and moderation analyses are employed to evaluate the effects on SME interest rate spreads, collateral requirements, and venture investment. The results show that government loan guarantees are associated with narrower interest rate spreads and lower collateral requirements, while venture investment partially mediates the relationship with collateral requirements. The positive association between loan guarantees and venture investment becomes significantly stronger after COVID-19, suggesting a countercyclical role in supporting entrepreneurial finance during periods of uncertainty. By integrating information asymmetry, signaling/certification, and resource-based perspectives, this study provides cross-country evidence on the links between government loan guarantees, venture investment, and SME financing conditions, offering implications for integrated guarantee policies. All reported coefficients are additionally interpreted in terms of economic magnitude (standardized effect size) rather than statistical significance alone, and all associations are explicitly framed as country-year evidence rather than firm-level causal proof.