The Story of Small Business Lending

Almost half the people who work in America own or work for a small business, and thus small businesses are important to the economy. There are many different types of small businesses, but they all face a common challenge: accessing the capital they need to operate and succeed. Banks are the traditional source of capital for small businesses, but small business lending has not changed much in 50 or 100 years and is a time-consuming and sometimes frustrating process for borrowers. However, innovation in financial services, referred to as fintech, shows promising signs of addressing some of the frictions that have long plagued the small business lending market. Using big data and technology, fintech has the power to make it easier for lenders to evaluate and better serve their customers, and also help small business owners see their own cash flow prospects and access credit more seamlessly. These changes have transformed the small business lending markets, ushering in new competitors and products and services that fundamentally alter and hopefully improve this critical ecosystem.