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

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.