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

Alina Malkova and Alex Weng

Research in Economics, 2024, vol. 78, issue 4

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.

Keywords: Small business; Peer-to-peer lending; Lending during COVID-19 (search for similar items in EconPapers)
JEL-codes: G23 L26 R51 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:78:y:2024:i:4:s1090944324000668

DOI: 10.1016/j.rie.2024.101002

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