SAN FRANCISCO, April 29, 2019 /PRNewswire/ -- A new report
published today by Oxford Economics found that a decade after the
financial crisis, American small businesses continue to be
neglected by banks. These smaller businesses are increasingly
turning to non-bank providers for their financing needs, enabling
them to drive the broader economy forward.
The "Big Business of Small Business" report,
launched in partnership with Funding Circle, finds that despite the
vast economic output generated by small businesses, banks are
continuing to focus on loans to larger companies. The report shows
that while commercial lending is increasing overall, banks relaxed
their approval standards and interest rate spreads for loans to
large and middle-market businesses much more than they did for
small companies in 2018, putting smaller businesses at a
disadvantage against larger competitors. Small businesses are
responsible for 47.5% of US employment1, but lending to
this segment remains a tiny proportion of US banks' overall balance
sheets (0.7%).
As a result, small businesses are increasingly moving on to
alternatives offering a faster, more efficient experience without
sacrificing on cost and transparency. In 2018, 32 percent of US
small businesses seeking finance turned to online providers, up
from 19 percent two years prior.2 This access to
affordable business credit creates a ripple effect throughout the
economy.
Highlights of the report include:
- On average, US small businesses who had previously applied for
a bank loan reported taking 8 hours to complete that application.
These customers then waited 1 to 3 weeks (33 percent of
respondents) or more than a month (30 percent) to hear back on the
bank's decision. At Funding Circle, businesses apply online in 10
minutes and receive a decision in as little as 24 hours after
document submission.
- 72 percent of Funding Circle's US customers surveyed made
Funding Circle their first choice for financing, ahead of a bank.
The primary reasons for borrowing through the platform included
Funding Circle's speed, simple process, and better terms compared
to other options.
- Every $1 lent to a small business
through Funding Circle contributed $2
to GDP — adding up to an annual contribution of $8.7 billion to the global economy, including a
GDP contribution of $2.8 billion to
the US economy in 2018 alone.
- With financing obtained through Funding Circle, small
businesses created and sustained 115,000 jobs globally, including
38,000 jobs in the United States
in 2018.
Funding Circle offers a 21st-century approach to accessing
business loans, with a simple online application process powered by
innovative technology and advanced data analytics. Over the course
of 2018, Funding Circle facilitated $792
million in new loans to US small businesses, capping off a
four-year period where new loan issuance grew at a compounded rate
of 92 percent per year. In the US, Funding Circle's portfolio of
outstanding small business loans is larger than almost 98% of
FDIC-insured banks'.3 Recently Funding Circle was named
both Top Small Business Lending Platform by the LendIt Fintech
Industry Awards, and Top Small Business Lender for Low APR by US
News. Last week, LendingClub, Opportunity Fund and Funding Circle
announced a collaboration in which LendingClub will connect
applicants looking for a small business loan to Funding Circle.
Bernardo Martinez, Funding
Circle US Managing Director, said: "At Funding Circle our
roots are in small business and we remain committed to delivering a
better financing experience for US business owners so they can
continue to push the economy forward. It's rewarding to see that 84
percent of Funding Circle's customers say they would return to
Funding Circle first in the future, and this is motivation for us
to continue working to exceed their expectations."
Sam Moore, Managing Director
of Economic Consultancy, Oxford Economics, said: "This
report offers a stark reminder both of the critical role that small
and medium-sized enterprises (SMEs) play in all four countries
analysed, and the uphill challenges they face when dealing with the
traditional banking sector. This could act as a serious curb on
future growth, so the substantial increase in Funding Circle's
lending profile from 2017—and the huge impact it is having across
all four economies—should be welcomed by policymakers and every
sector of the business community."
Samir Desai, Funding Circle
co-founder and CEO said: "Today's news highlights the extent
to which technology has transformed the financial landscape, and
the increasing importance of online lending to small businesses.
This sector has been hugely underserved globally for decades
despite the economic importance of SMEs. Small businesses mean big
business, and that's why we're passionate about helping them to
succeed."
About Funding Circle
Funding Circle (LSE: FCH) is a
global small business loans platform, connecting businesses who
want to borrow with investors who want to lend in the UK, US,
Germany and the Netherlands. Since launching in 2010,
investors across Funding Circle's geographies - including more than
90,000 retail investors, banks, asset management companies,
insurance companies, government-backed entities and funds - have
lent more than $9.5 billion to 68,000
businesses globally. Funding Circle is a member of the FTSE 250
Index.
About Oxford Economics
Oxford Economics was founded in
1981 as a commercial venture with Oxford
University's business college to provide economic
forecasting and modelling to UK companies and financial
institutions expanding abroad. Since then, it has become one of the
world's foremost independent global advisory firms, providing
reports, forecasts, and analytical tools on more than 200
countries, 250 industrial sectors, and 7,000 cities and
regions.
Headquartered in Oxford,
England, with regional centres in London, New
York, and Singapore, and
offices all over the world, Oxford Economics now employs more than
250 professional economists, industry experts, and business
editors—one of the largest teams of economists and thought
leadership specialists.
1US Small Business Administration Office of Advocacy:
2018 Small Business Profile.
https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf
2Federal Reserve Small Business Credit Survey:
2019 Report on Employer Firms.
https://www.richmondfed.org/community_development/about_commaff/small_business/credit_survey#ac4b643a04f84fd4b1631c4ffa28c3c6
3Source: Federal Deposit Insurance Corporation (FDIC)
Statistics on Depository Institutions. December 2018. "Amount of currently outstanding
commercial and industrial loans less than $1,000,000 held in domestic offices."
https://www5.fdic.gov/sdi/download_large_list_outside.asp.
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