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Why Did Small Business FinTech Lending Dry Up During the COVID-19 Crisis?

Author

Listed:
  • Itzhak Ben-David
  • Mark J. Johnson
  • René M. Stulz

Abstract

FinTech small business lenders fund loans mostly through credit facilities and securitizations. This business model could make them financially constrained when a shock reduces the value of existing loans. We find evidence supporting this prediction using detailed applicant-level and lender-level data from a platform that intermediates loans between dozens of FinTech lenders and small businesses. Despite the increased demand for credit at the onset of the COVID crisis, the credit supply quickly dwindled, regardless of borrowers' credit quality. Overall, our analysis demonstrates the fragility of the FinTech lending model in the face of a crisis.

Suggested Citation

  • Itzhak Ben-David & Mark J. Johnson & René M. Stulz, 2021. "Why Did Small Business FinTech Lending Dry Up During the COVID-19 Crisis?," NBER Working Papers 29205, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29205
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    References listed on IDEAS

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    Cited by:

    1. Tobias Berg & Andreas Fuster & Manju Puri, 2022. "FinTech Lending," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 187-207, November.
    2. Lee, Churn Ken & Lee, Munseob, 2023. "Regional redistribution through SBA guaranteed loan programs," Journal of Corporate Finance, Elsevier, vol. 78(C).
    3. Marco Pagano & Josef Zechner, 2022. "COVID-19 and Corporate Finance [The risk of being a fallen angel and the corporate dash for cash in the midst of COVID]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 11(4), pages 849-879.
    4. Paul Beaumont & Huan Tang & Eric Vansteenberghe, "undated". "Effets collatéraux : le rôle des Fintechs dans le financement des petites et moyennes entreprises," Analyse et synthèse 157, Banque de France.
    5. Paul Beaumont & Huan Tang & Éric Vansteenberghe, 2024. "Collateral Effects: The Role of FinTech in Small Business Lending [Effets collatéraux : le rôle des Fintechs dans le financement des petites et moyennes entreprises]," Débats économiques et financiers 42, Banque de France.

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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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