Since the financial crisis of 2008, much has been written about the importance of small and mid-sized businesses (SMBs). It is clear that small businesses fuel job creation in the United States, as they account for two out of every three net new jobs and represent over 28 million businesses. An ever more striking data point is the shifting demographic landscape of the small business community in the years to come. According to the U.S. Census Bureau, by 2044, more than half of all Americans will belong to a minority group. This should result in an important increase in the number of minority-owned small businesses across the country. Working hard to support the growth of these businesses will be paramount in ensuring that we continue to contribute to job creation and to the building of stronger communities across the country.
Access to capital remains crucial to the growth of SMBs. For decades, small business owners have relied on traditional banking institutions to access financing. However, market forces and increased regulations have made it difficult for these traditional funding sources to meet the demands of America’s small business owners. This has created a large shortage in the supply of credit, specifically for minority business owners, who have experienced particular difficulty in obtaining loans.
In the past several years, finance and technology have come together to address this shortfall. Funding Circle, Lending Club, The Credit Junction, to name a few, represent a new wave of technology and data driven lending platforms that have come of age to address this need. By leveraging technology to provide a more user-friendly experience for small business owners, the new FinTech lenders are opening avenues of credit heretofore unseen. Furthermore, they are breaking down the physical barriers to entry by creating unique distribution relationships. From Lending Club's partnershipwith Alibaba, to The Credit Junction's strategic alliance with the Houston Minority Supplier Developer Council, these initiatives ultimately provide a range of alternatives for SMBs to evaluate and pursue.