Online Lending Providing Greater Access to Capital for Small Business Owners
According to data from Morgan Stanley, online lenders provided $7.9 billion in small business loans last year, a 68% increase from 2014. Caused in part by increasingly strict regulation on the banking industry, including Dodd-Frank, entrepreneurs are looking elsewhere to find the loans they need to start or expand their small business.
Lending companies including OnDeck, Lending Club, Prosper, Funding Circle, Biz2Credit, Fundera, and Kabbage are becoming popular by offering loans to small businesses ranging from $2,000 to $100,000. This April, the National Federal of Independent Business (NFIB) partnered with Kabbage to offer loan services to all of its 325,000 members.
As online lending companies continue to gain prominence, federal agencies may start to take a more “hands on” approach. The Treasury Department has already issued a Request for Information (RFI) about online lending while the Consumer Financial Protection Bureau (CFPB) began hearing consumer complaints against online lenders this past March.
Online lending companies provide small loans to business owners in quick fashion, something the current lending industry is failing to do because of the burdensome and complex regulation Congress put in place. Congress should look to ease banking and securities regulation on a larger scale to ensure all businesses have access to capital, not impose new regulation on an emerging and exciting marketplace.