Between 2015 and 2017, the amount of lending to small businesses by the five leading online lending providers increased 50 percent, according to a new report from NDP Analytics, a Washington, D.C.-based economic research firm. Collectively, the amount of those loans reached $3.9 billion in 2017 from $2.6 billion in 2015.
The report, entitled “The Economic Benefits of Online Lending to Small Businesses and the U.S. Economy,” found that the “nation’s largest FinTech small business lending platforms funded nearly $10 billion in online loans from 2015 to 2017, generating $37.7 billion in gross output, creating 358,911 jobs and $12.6 billion in wages in U.S. communities.”
According to a statement from ETA, research shows “that, on average, for every $1 lent to small businesses, sales of small business borrowers increased by $2.31, creating $3.79 in gross output in local communities across the country.” The NPD report also found that a third of the borrowing covered in the study goes to firms located in low-income communities.
“About 24 percent of these borrowers are microbusinesses with less than $100,000 in annual sales and two-thirds have less than $500,000 in annual sales,” the statement said. “About 42 percent of small businesses borrowed between $10,000 and $50,000 from the five online small business lenders with the average amount being $55,498.”
So will online lending replace traditional forms? Probably not. But digital channels will help more small business gain capital, according to the statement.
“Online lending complements, rather than replaces, traditional funding sources,” said Jason Oxman, CEO of ETA. “Advanced technology enables online small business lenders to gather information and assess credit risks quickly to provide critical funding for small businesses. Online small business lenders provide key options and benefits to American small business owners in the highly competitive lending marketplace.”