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Financial Technology

Network Journal; New York Vol. 23, Iss. 4,  (Winter 2016/2017): 44.

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New credit options for small businesses

I spend a lot of time on the road, meeting with small-business owners throughout New York, New Jersey, Puerto Rico and the U.S. Virgin Islands. Early in November, I was in the U.S. Virgin Islands, where I participated in a small-business finance conference. Afterward, a restaurateur, the head of a firm that helps domestic violence survivors, and the owner of a consulting firm approached me. All three asked for assistance in overcoming the same major obstacle to growing their business: access to capital. Thousands of miles away in New York, at small-business events in Rochester, Binghamton and Syracuse, small-business owners express the very same concern.

Time and again, no matter where I go, the number-one problem that crops up is access to capital and the difficulty of obtaining loans from traditional lending sources like banks. Low cash flow and short credit histories are some of the factors that make it difficult for small businesses to get loans. In addition, bank lending to small businesses has been slow to recover postRecession. Despite low interest rates that would otherwise make for a good borrowing economy, many banks are being increasingly selective and denying loans to small businesses. With small businesses the driving force behind improving our economy (they created nearly two-thirds of the net new jobs generated in 2014, according to the SBA Office of Advocacy), helping them should be our highest economic priority.

As I travel around hearing about barriers, best practices and big ideas, I consistently see financial technology (fintech) changing the traditional lending landscape. Fintech startups are changing the game as we know it by making financial services more efficient, and they are doing this by using software and technology to open the doors to the Internet economy. So when small-business owners...