Business owners can now secure loans in days, or even hours, without ever walking into a bank, thanks to the explosion of alternative lenders.
The new crop of lenders, mostly online, fill an important gap in access to credit for small businesses. They also slip through the regulatory cracks, which has made it difficult for the government to rein in bad lending practices in recent years.
“One of the reasons the small-business online lenders fall through the cracks is that there is no regulator at the federal level that licenses them because they are not banks,” said Karen G. Mills, a senior fellow at the Harvard Business School and the former administrator of the U.S. Small Business Administration under President Barack Obama.
Mills published a white paper in December on the state of small-business lending, co-written by Brayden McCarthy, vice president of strategy at Fundera, an online small-business credit marketplace. The authors called for regulatory action to prevent a repeat of the subprime crisis.
