Report Demonstrates How Online Lenders Benefit Economy

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Main Street signA report on “The Economic Benefits of Online Lending to Small Businesses and the U.S. Economy” was released yesterday, using data from 180,000 U.S. small businesses that represented nearly $10 billion in funding from 2015 to 2017.

The report used data from five online lenders, including OnDeck, Kabbage and Lendio, and was sponsored by the Electronic Transactions Association (ETA), the Small Business Finance Association (SBFA) and the Innovative Lending Platform Association. The report was researched by three economists at NDP Analytics, an independent research firm.

One of the key findings was that the ten billion dollars funded from 2015 to 2017 by five of the top alternative small business lenders generated $37.7 billion in gross output and created 358,911 jobs and $12.6 billion in wages.

“I think the most important takeaway from this study is that small businesses are benefiting from a wide variety of choices in lending products,” said Jason Oxman, CEO of the ETA. “And, in particular, the online small business lenders have provided really a remarkable amount of working capital to small businesses in this country.”

Oxman told deBanked that he was surprised to learn from the report the percentage of borrowers that operate extremely small businesses. According to the report, 24 percent of online business borrowers operate businesses that have less than $100,000 in annual sales. And two-thirds of online business borrowers had less than $500,000 in annual sales.

“These are clearly small businesses,” Oxman said. “These are companies that obviously have capital needs and are getting those needs met by online small business lenders.”

New York State was a focus of part of the research. According to a press release for the report, data extracted from it indicated that “overall, the small business loans provided by online lenders [from 2015 to 2017] generated $2.5 billion in gross output and created 20,154 jobs with over $795 million in wages” for communities in New York State.

“We [organized the report] with New York in mind,” said Steve Denis, Executive Director at the SBFA. “We wanted to send a message to show how much of an impact the online lending industry had on the state.”

Other interesting data from the report include:

— 75 percent of U.S. businesses have less than 10 employees.

— 22 percent of small business owners use their personal savings to expand

— Online lenders offer loans to companies in all stages of their life cycle and the distribution of company age is relatively uniform.

“[Alternative small business lending] is creating a lot of economic activity,” Denis said. “We’re helping to create jobs, and we need to protect this tool. It’s a valuable resource for businesses…and this [report] demonstrates how important it is to the economy.”

 

Last modified: May 31, 2018

Category: Business Lending, Online Lending, Small Business


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