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Reasons why companies need non-bank lenders

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In 2008, the financial meltdown profoundly altered the market for lending. Traditional banks became more cautious by tightening lending requirements which resulted in a decrease in small- and medium-sized companies (SMBs) having access to capital. This left a gap on lending to non-banks and resulted in a change in the financial services. A report entitled “The Rise of Finance Companies and FinTech Lenders in Small Business Lending” said “during the recovery period [following the financial crisis], nonbank lenders expanded annual lending by 70% from 2010 to 2016, significantly more than banks.”

Nonbank lenders are taking market shares from traditional banks, particularly in small-business lending, which was previously unserved by the legacy banks. The growth of nonbanks is driven by a significant degree of specialization, creativity personalization, acceleration and personalization. The four main drivers for nonbank lending are more important and urgent because of the spread of the pandemic. SMBs turned to nonbank lenders for quick relief through the Paycheck Protection Program (PPP), businesses sought out loans to develop their e-commerce presence, and there has been an increase in new business applications from the unemployed-turned-entrepreneur.

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