Larry Summers Says Digital Lenders Will Capture 70% of Small Business Lending

A Fortune Magazine article on banking and small business lending points out that 39% of  all small businesses want business loans under $50k.  Community banks have historically not served this market.  Our analysis of FDIC data (see our study, Automating Small Business Lending Online) shows community banks have nearly half of the C&I small business loans from $100k to $1MM, but less than 10% of small business loans under $50k.

The Fortune article asks how community banks will respond to the growth of non-bank online small business lenders.  Some believe these digital lenders will capture the majority of small business loans is just a few years, such as former Treasury Secretary, Larry Summers.

"Online lenders could capture up to 70% of the small business lending marketplace."     

Larry Summers, 2015 AltLend Conference

He may have a point.  Traditional "analog" lending practices by banks are like CDs sales on music: old technology that is losing favor.  While sales of CDs are falling as shown below (like bank volumes), digital delivery of music is booming, and in five years iTunes captured 80% of the market.

In fact, community banks have the data and the relationships to win revenues in the new digital small business lending marketing place.  You just need to provide a digital online lending technology platform for small business, like our CashFlow Checking.