NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, December 22, 2016

Problem: Though women own a third of U.S. small businesses, they get less than 20% of the loans made through the bank-centric, federally backed system that distributes a lot of credit to such firms.

Reasons: Perhaps a combination of biased loan decisions, fear of rejection by traditional lenders and the unique characterstics of women-owned businesses.

Emerging solution: Online lending, because it’s less intimidating than staring down a loan officer at the local branch, and it holds the promise of more objective credit analyses.

Indeed, the early evidence suggests that online applications and automated decisions are adding fairness to the process of granting small-business loans to female entrepreneurs.