This report examines how online business lending may significantly improve the access of small- and medium-sized enterprises to financing – the number one barrier to growth for SMEs around the globe. By leveraging new business methods and targeted data analysis of past transactions, social interaction data, and back-end financial data, online business lending may be stepping in to close the $2 trillion global credit gap faced by SMEs. The report focuses on PayPal’s Working Capital (PPWC) product that enables SMEs to apply for and obtain short-term credit funded by a state-chartered industrial bank and on Kiva, an easy-to-use online marketplace that connects lenders and borrowers.
Learn about the challenges SMEs face in securing access to financing, the demography of the SMEs securing online business loans, the economic opportunity online business lending presents, policy recommendations to avoid redundant and inefficient regulations and address the differences between online business lending products and traditional lending products.
Key findings stemming from the analysis of PPWC and Kiva services include:
- Areas most affected by the 2008 financial crisis have the highest amount of online business loans disbursements;
- Young and minority-owned businesses with low and moderate income benefit particularly from online business loans in comparison to traditional retail bank loans;
- Online business loans can boost the growth of SMEs in underserved counties by up to 22.4% from one year to the next, while comparable retail businesses in the U.S. grew by only 1.72 per- cent over the same period;
- Online loan products and programs can have significant economic benefits with the potential to boost economic activity in the U.S. by $697.95 billion, or 3.98 percent of the country’s 2015 GDP.
Read the full report here: access-to-finance-PayPal-public-policy-paper