There are 28 million small businesses in the United States, according to the Small Business Administration – and, according to a Cleveland Fed survey, 47% of them applied for financing in the past 12 months. Credit is the lifeblood of any business, but for a small business it can be crucial. For many small businesses, the need for financing often comes up quickly and unexpectedly. Getting timely access to credit when they need it could literally make or break them.
And yet 50% of small businesses who were approved for loans got less funding than they asked for. That means that half of small businesses who actually got loans still didn’t get the amount they needed–and of course, that doesn’t even count the businesses whose applications were rejected.
That partly explains why, although 12% of small businesses expect to increase their company’s borrowing in the next 12 months, only 5% of that financing will come from their primary bank according to Barlow Research. New marketplace lenders have stepped in to fill the needs of those small businesses who can’t get access to the capital they need. Through automated online application processes, marketplace lenders are able to approve small business loans within hours–while traditional lenders using manual application process typically take several days to process loans.
Of course, this speedy access to cash comes at a steep price. Marketplace lenders offer loans at much higher interest rates, with confusing, opaque terms that borrowers often don’t fully understand. These loans aren’t great for small business owners–but speed and convenience trumps affordability, enabling alternative lenders to make steady inroads in this crucial market segment.
The opportunity for traditional lenders is clear: adopt online lending applications and recapture the vast market of small business loans. Download our free ebook to find out how to create a smarter, faster lending process, capture new customers–especially millennial bank customers–and make your small business loans more profitable.
Get the facts on online small business lending.