A new Harvard Business School Working Paper titled, The State of Small Business Lending: Innovation and Technology and the Implications for Regulation, was released last week. It was written by Karen Mills, former SBA Administrator and current Senior Fellow at the Harvard Business School and Brayden McCarthy, VP of Strategy at Fundera.
The entire paper is over a hundred pages and covers a lot of ground delving into many of the details of the small business lending landscape. To get some background and understand the goals of the paper we spoke with Brayden McCarthy to learn more.
Brayden stated that there were two goals with the paper. The first one was to lay a foundation for regulatory reform, seeking a balance between protecting borrowers and investors in the small business online lending market while at the same time encouraging the innovation that has already led to broader access to credit for small business owners. He noted that 50-100 years ago was when many of today’s regulations were put in place when there was obviously no concept of online lending so it is certainly time for a new framework.
The second goal was to focus on incumbent banks and how they can partner with this new industry. As Lend Academy has discussed in the past, bank partnerships are a big part of the online lending industry and we predict 2017 will be an even bigger year for partnerships. In the paper they put forward their views on what strategies will differentiate the winners from the losers and they go into some detail on the different kinds of partnerships that are in place today.