The Impacts of Fintech on Small Business Borrowing

Abstract

Fintech lending to small businesses is growing rapidly in the United States, but the industry remains largely unregulated. In this study, I examine borrower outcomes when a borrower states that they are using credit from a fintech for small business purposes; I subsequently examine the differences in loan terms for regulated versus unregulated small business credit. I find that small business loans are charged a higher rate of interest than consumer loans from the same fintech lender, and also find that small business fintech loans have worse terms than small business loans from regulated banking entities. I propose a regulatory framework to offer small business borrowers protection from predatory fintech lenders and to clarify the proper regulators of this growing industry.

Keywords: Fintech; small business credit; small business loans; SBA loans

JEL Classification: G23, M2