The Rise of Fintech Lending to Small Businesses: Businesses’ Perspectives on Borrowing

Online lending is a rapidly expanding segment of the financial market. The Small Business Credit Survey (SBCS) shows that businesses borrowing online are younger, smaller, and less profitable. Through reaching borrowers less likely to be served by traditional lenders, fintech lenders have expanded the small business finance market. After controlling for compositional differences between online and bank borrower, the authors find that loan application amounts are generally smaller with fintech lenders; businesses that receive fintech loans expect more revenue and employment growth than those receiving a bank loan; and businesses that borrow from banks are more satisfied than businesses that borrow online. These results highlight issues that the financial industry and regulators should examine as fintech lending to small businesses continues to expand.