While a primary need of small businesses is the funding to establish operations, the capital to maintain and expand business operations is just as important. Funding is necessary to pay employees, buy supplies, and market the business. And these are just some of the primary costs of operating a business as there are various other expenses depending on variables such as the type of business and related legal regulations.
The economic benefits of online lending to small businesses in America seem to be significant, if not substantial. This source of funding doesn’t necessarily replace conventional financing but rather compliments it. Present 21st Century technology enables online lenders to expediently collect information, assess credit risks, and transfer funds as soon as they are needed.
Between 2015 and 2017, online lenders funded approximately $10 billion of loans to small businesses. Online loans to small businesses produced $37.7 billion in gross output, created 358,911 jobs, and generated $12.6 billion in wages from 2015 through 2017.
About one-third of the borrowers of these loans are located in lower-income communities. Approximately 24 percent of them are companies with less than $100,000 in annual sales, and two-thirds have less than $500,000 in annual sales.
For every dollar in small businesses loans from 2015 to 2017, sales of the small business increased between $1.05 and $2.84, with an average of $2.31. Additionally, this lending dollar generated an average of $3.79 in gross output in the local communities of the borrowing business enterprise.
Thus, the economic impact of online lending extends beyond financing small businesses to maintain and/or expand operations. The indirect effects of a loan consist of the activity generated throughout the entire chain of supply, and the income that results from all such activity, whether direct or indirect.
Online lending is helping to fill a critical gap in funding for the owners of small businesses. With this increased access to capital, small businesses theoretically have a greater capacity to generate and realize higher sales revenue. The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services, and advice for clients in all aspects of commercial compliance, business litigation, and transactional law. Call us at (818) 888-2220, send an email inquiry to firstname.lastname@example.org or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.