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Beyond banks: Navigating the shift to peer-to-peer lending for small enterprises

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  • Malkova, Alina
  • Weng, Alex

Abstract

This study sheds light on how non-traditional lending avenues, specifically peer-to-peer (P2P) lending platforms, influence the financing decisions of small businesses. It introduces a theoretical framework where borrowers weigh the option between opting for a cost-effective traditional bank loan versus an expensive option through crowdlending platforms. The findings suggest that crowdlending platforms become a more appealing choice in the event of credit supply disruptions in traditional banking sectors. Leveraging the phased introduction of mobility restrictions during the COVID-19 pandemic as a case study, our research demonstrates a noticeable pivot of small businesses towards alternative funding sources, such as P2P lending. These findings emphasize the value of offering a variety of financial tools to small businesses so they can weather economic storms.

Suggested Citation

  • Malkova, Alina & Weng, Alex, 2024. "Beyond banks: Navigating the shift to peer-to-peer lending for small enterprises," Research in Economics, Elsevier, vol. 78(4).
    • Handle: RePEc:eee:reecon:v:78:y:2024:i:4:s1090944324000668
    DOI: 10.1016/j.rie.2024.101002
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    References listed on IDEAS

    as
    1. Ströbel, Johannes & Howell, Sabrina & Kuchler, Theresa & Snitkof, David, 2021. "Racial Disparities in Access to Small Business Credit: Evidence from the Paycheck Protection Program," CEPR Discussion Papers 16623, C.E.P.R. Discussion Papers.
    2. Robert W. Fairlie, 2020. "The Impact of Covid-19 on Small Business Owners: The First Three Months after Social-Distancing Restrictions," CESifo Working Paper Series 8581, CESifo.
    3. Remy Beauregard & Jose A. Lopez & Mark M. Spiegel, 2020. "Small Business Lending during COVID-19," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2020(35), pages 01-05, November.
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    5. Erel, Isil & Liebersohn, Jack, 2020. "Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program," Working Paper Series 2020-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    6. Granja, João & Makridis, Christos & Yannelis, Constantine & Zwick, Eric, 2022. "Did the paycheck protection program hit the target?," Journal of Financial Economics, Elsevier, vol. 145(3), pages 725-761.
    7. Kong, Edward & Prinz, Daniel, 2020. "Disentangling policy effects using proxy data: Which shutdown policies affected unemployment during the COVID-19 pandemic?," Journal of Public Economics, Elsevier, vol. 189(C).
    8. Isil Erel & Jack Liebersohn, 2020. "Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program," NBER Working Papers 27659, National Bureau of Economic Research, Inc.
    9. Lei Li & Philip Strahan, 2020. "Who Supplies PPP Loans (And Does it Matter)? Banks, Relationships and the COVID Crisis," NBER Working Papers 28286, National Bureau of Economic Research, Inc.
    10. Jin-Hyuk Kim & Frank Stähler, 2020. "The Impact of Peer-to-Peer Lending on Small Business Loans," CESifo Working Paper Series 8268, CESifo.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Small business; Peer-to-peer lending; Lending during COVID-19;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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