Why Did Small Business Fintech Lending Dry Up During the Covid-19 Crisis?

60 Pages Posted: 6 Sep 2021 Last revised: 20 Apr 2023

See all articles by Itzhak Ben-David

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Mark J. Johnson

Brigham Young University - Department of Finance

René Stulz

Ohio State University (OSU) - Fisher College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 2021

Abstract

FinTech small business lenders fund loans mostly through credit facilities and securitizations. This business model could make them financially constrained when a shock reduces the value of existing loans. We find evidence supporting this prediction using detailed applicant-level and lender-level data from a platform that intermediates loans between dozens of FinTech lenders and small businesses. Despite the increased demand for credit at the onset of the COVID crisis, the credit supply quickly dwindled, regardless of borrowers' credit quality. Overall, our analysis demonstrates the fragility of the FinTech lending model in the face of a crisis.

Suggested Citation

Ben-David, Itzhak and Johnson, Mark J. and Stulz, René, Why Did Small Business Fintech Lending Dry Up During the Covid-19 Crisis? (September 2021). NBER Working Paper No. w29205, Available at SSRN: https://ssrn.com/abstract=3918100

Itzhak Ben-David (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

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HOME PAGE: http://https://u.osu.edu/ben-david.1/

National Bureau of Economic Research (NBER) ( email )

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HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Mark J. Johnson

Brigham Young University - Department of Finance ( email )

Provo, UT 84602
United States

HOME PAGE: http://sites.google.com/view/markjohnson/home

René Stulz

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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