Why Did Small Business Fintech Lending Dry Up During March 2020?
With the onset of the COVID-19 crisis in March 2020, small business lending through fintech lenders collapsed. We explore the reasons for the market shutdown using detailed data about loan applications, offers, and take-up from a major small business fintech credit platform. We document that while the number of loan applications increased sharply early in March 2020, the supply of credit collapsed as online lenders dropped from the platform and the likelihood of applicants receiving loan offers fell precipitously. Our analysis shows that the drying up of the loan supply is most consistent with fintech lenders becoming financially constrained and losing their ability to fund new loans.
We are grateful to Leandro Sanz for research assistance. We would like to thank SafeGraph, Inc. for making their data available for academic research related to COVID-19. René Stulz consults for financial institutions and is retained by their attorneys for expert testimony. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.