How Does Peer-to-Business Lending Affect Financial Policy of SMEs?

32 Pages Posted: 4 Mar 2021

See all articles by Afonso Eca

Afonso Eca

NOVA School of Business and Economics

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Melissa Porras Prado

Nova School of Business and Economics; Centre for Economic Policy Research (CEPR)

Antonino Emanuele Rizzo

Nova School of Business and Economics

Date Written: March 3, 2021

Abstract

We study how alternative sources of financing, Peer to Business (P2B) platforms, affect the financial policy of small and medium-sized enterprises (SMEs). We find that firms obtaining P2B loans are higher quality firms as they are large, more profitable, with higher sales growth, higher bank debt, and lower default rates. We conclude that P2B platforms are serving the same type of firms than traditional banks. While P2B loans do not seem to affect investment policy and performance, it does affect financial policy. Firms use the availability of P2B to reduce long-term bank debt, while they increase short-term bank debt following P2B lending. In addition, SMEs increase the number of lending relationships and reduce their dependence on a single bank, in particular those with less stable funding and lower liquidity. Our findings suggest that FinTech lending complements the debt financing choices of SMEs and allows them to diversify away from traditional banks.

Keywords: FinTech, SMEs, Peer-to-Business lending, Small business lending

JEL Classification: G21, G23, O33

Suggested Citation

Eca, Afonso and Ferreira, Miguel Almeida and Porras Prado, Melissa and Rizzo, Antonino Emanuele, How Does Peer-to-Business Lending Affect Financial Policy of SMEs? (March 3, 2021). Available at SSRN: https://ssrn.com/abstract=3796896 or http://dx.doi.org/10.2139/ssrn.3796896

Afonso Eca

NOVA School of Business and Economics ( email )

Rua da Holanda, no. 1
Carcavelos, 2775-405
Portugal

Miguel Almeida Ferreira

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Melissa Porras Prado (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda 1
Carcavelos, 2775-405
Portugal

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Antonino Emanuele Rizzo

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

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