If your city has terrible traffic, your company might actually end up paying higher interest rates on its loans.
March 25, 2026
Original Paper
The Costs of Being Stuck in Traffic: Evidence from Debt Contracting
SSRN · 6459122
The Takeaway
Lenders charge higher prices and impose stricter rules on companies in congested areas because traffic makes it harder for bank officials to physically visit and monitor the business. When gridlock prevents face-to-face oversight, banks treat the lack of information as a financial risk that the borrower must pay for in higher interest.
From the abstract
While traffic congestion poses a significant risk to companies' operations, little is known about how capital providers respond to such risk. Our study fills the knowledge gap by investigating the impact of traffic congestion on the cost of debt capital. We find that lenders impose stricter price and non-price loan provisions on borrowers exposed to higher levels of traffic congestion. We further document that lenders respond to traffic congestion with more intensive use of covenants and perform