Small business lending by banks has been declining since the 1990s – and the regulatory squeeze on banks since the 2008 recession has resulted in an even sharper decline in recent years.
So why do people still think that banks are the only places to get small business loans? The Answer is simple: they don’t know any better.
While banks have been turning down the majority of small business owners, lending marketplaces have been quietly fueling small companies and mom-and-pop shops across America. In fact, loan origination through lending marketplaces increased a whopping 700% in the years following the recession.
Lending marketplaces aren’t just boosting small businesses, though – they’re also making business owners happier. Almost 80% of small business owners who secured funding through online lending reported satisfaction with both the simpler application process and the shorter wait for a credit decision. Compare that to just half of bank borrowers who report satisfaction and it’s clear that marketplace lending offers a better experience.
So why are lending marketplaces booming while banks are bombing? For starters, emerging technologies have helped lending marketplaces streamline the painstaking process of applying for funding with traditional lenders.
Rather than forcing applicants to spend several hours filling out paperwork, lending marketplaces fast-track the application process by using a single online application to match business owners to financing options from a variety of lenders. This saves hours of time and hassle, and it gives business owners unprecedented access to an assortment of loan products.
Approval and funding times are also faster, because lending marketplaces are subject to different regulatory bodies and timelines than banks. Whether it’s a struggling local business that needs funding to keep the lights on or a thriving company bursting at the seams and ready to expand, faster funding is often the difference between a dream and a dream-come-true.