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Millenial SMB Owners Prefer Alternative, P2P Lenders

Businesses routinely take out loans of all sorts to keep their operation running and manage their cash flow (an existing line of credit for example).

On the whole, millennial owners appear to be more likely than average to leverage lending in general, but they are apparently less likely to have their line of credit at their primary business bank.

An estimated 27 percent of U.S. small businesses, in fact, used online alternative lenders in 2017 (also known peer-to-peer lenders or marketplace lending platforms) according to Mercator Advisory Group’s latest report, Business Banking Services: Keeping Up with Millennial Owners. That's down slightly from previous years, but Millennials specifically are twice as likely to use alternative lending to finance their business.

Whether this signals the future of lending is anyone's guess, but it is useful to see how enterprises approach loans and lines of credit - the financial side of their operations. 

Additional highlights of the report include: 

+ 48% of Millennial owners report they currently have a loan from an alternative lender compared to 25% of businesses that are run by owners aged 35 or older.

+ Only 7% say they use alternative lenders for a better interest rate.

“Small businesses need loans to run their businesses as they are often constrained by cash flow management challenges. They need access to credit wherever they can get it and will look outside of their banks for it. They are more likely to borrow on credit cards and to use personal accounts, and they often need to delay routine purchases due to cash flow constraints. Ease of loan application and faster funding are of critical importance,” noted report author Karen Augustine, Mercator Advisory Group’s Senior Manager of Primary Data Services.

Some of the companies referenced in the report include Kabbage, Lending Club, OnDeck Capital, and Prosper.
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