Online Lenders Complement Bank Lending to Small Businesses

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The recent initial public offerings of the Lending Club and OnDeck Capital, have some observers claiming that online lending platforms will soon replace banks as a major source of small business credit. I disagree.

Rather than substituting for bank loans, online lenders are filling a niche, providing capital primarily to small companies that previously had been unable to borrow. Where they have been substituting for other lenders, online lenders have been replacing high cost alternatives to traditional bank loans, like credit card debt and merchant cash advances.

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