The report titled, “The Economic Benefits of Online Lending to Small Businesses and the U.S. Economy”, was published by NDP Analytics, an economic research firm, and covered 2015-2017. It also found that nearly 360,000 jobs were created during the period by online lenders.

The report reinforced the importance of small business for the economic well-being of the US, with online lending covering business maintenance and expansion, two areas in which these enterprises usually fall short in terms of capital. Despite this important role, the report mentions that online lending complements traditional funding rather than replaces it.

The economic and jobs output cited by the report were generated by just five online lenders: Kabbage, OnDeck, Lendio, and two unnamed lenders that preferred anonymity. The five lent USD 10 billion to a variety of small businesses including restaurants, doctors, and manufacturers. On average, for every dollar loaned, sales went up by USD 2.31, resulting in USD 3.79 in gross output to local communities.

This emphasis on the impact of the loans on local communities is an important part of the report, with the report’s authors, Nam Pham, saying that:

“As these businesses succeed, so do the communities around them. Small businesses are increasingly turning to online lenders to help cover inventory, payroll for employees, and other expenses at critical junctures in their growth. The loan impacts not just the borrower, but those who work and engage with that business.”

Furthermore, the report also found that about a third of those small business that borrow from online lenders are in lower-income communities, with many having less than USD 100,000 in sales annually.

The study was sponsored by the Electronic Transaction Association, Innovating Lending Platform Associations, and the Small Business Finance Association, which are lobby groups.

By Elliot Lyons, Research Analyst