The Impacts of Fintech on Small Business Borrowing

31 Pages Posted: 4 Feb 2020

See all articles by Lenore Palladino

Lenore Palladino

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics; Franklin & Eleanor Roosevelt Institute

Date Written: January 11, 2020

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

Suggested Citation

Palladino, Lenore, The Impacts of Fintech on Small Business Borrowing (January 11, 2020). Available at SSRN: https://ssrn.com/abstract=3517804 or http://dx.doi.org/10.2139/ssrn.3517804

Lenore Palladino (Contact Author)

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics ( email )

Amherst, MA 01003
United States

Franklin & Eleanor Roosevelt Institute ( email )

4079 Albany Post Rd.
Hyde Park, NY 12538
United States

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