By Bradley Stockwell
Marketing Director Merchant Capital Source
Small business lending is changing and no one has embraced this more than millennial business owners and entrepreneurs. A fall 2014 Bank of America study found that 14 percent of millennial business owners have used non-traditional lending services, which include peer-to-peer lending platforms such as Lending Club and alternative lenders such as OnDeck, Kabbage and Merchant Capital Source which offer merchant cash advances and business loans. This is in comparison to just one percent of baby boomers and three percent of Gen-Xers.
So why are millennials embracing alternative lending more than any other age bracket? The most sweeping answer would be that with anything new, young people will be the first to accept it, but there is much more to why millennials and alternative lenders are the perfect match.
First non-traditional lending doesn’t have the same strict qualifications banks do. They’re willing to take on business owners most banks see as too risky. This is ideal for young people who don’t have established credit lines, a lengthy operating history or access to collateral. Also many alternative lenders are based online, which makes them very accessible to millennials. This streamlines the application process, with little to no paperwork, and funding can typically be received within a few days.
Although millennial entrepreneurs and small business owners seem to be leading the charge for alternative lending, the industry is growing rapidly and gaining wider acceptance. With an ever increasing list of alternative lenders going public and many banks borrowing from, or teaming up with alternative lenders, we may soon need to redefine what traditional lending is.