Fintech, Small Business & the American Dream
Page 22
10. “2015 Small Business Credit Survey: Report on Employer Firms,” Federal Reserve Banks , March 2016, p. 9, https://www.newyorkfed.org/medialibrary/media/smallbusiness/2015/Report-SBCS-2015.pdf .
11. Ryan N. Banerjee, Leonardo Gambacorta, and Enrico Sette, “The Real Effects of Relationship Lending,” Bank for International Settlements Working Papers , no. 662, September 2017, https://www.bis.org/publ/work662.pdf .
12. John R. Walter, “Depression-Era Bank Failures: The Great Contagion or the Great Shakeout?,” Federal Reserve Bank of Richmond Economic Quarterly 91, no. 1 (2005), https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2005/winter/pdf/walter.pdf .
13. “Commercial Banks in the U.S.,” FRED Economic Data (Federal Reserve Bank of St. Louis) , last modified August 16, 2018, https://fred.stlouisfed.org/series/USNUM .
14. “Commercial Banks—Historical Statistics on Banking,” Federal Deposit Insurance Corporation , accessed September 14, 2018, https://www5.fdic.gov/hsob/SelectRpt.asp?EntryTyp=10&Header=1 .
15. “FDIC Community Banking Study,” Federal Deposit Insurance Corporation , December 2012, pp. 2–4, https://www.fdic.gov/regulations/resources/cbi/report/cbi-full.pdf .
16. Note: A thrift , also known as a savings and loan , specializes in taking deposits for savings, and making loans , especially mortgage loans . Thrifts came into vogue in the United States starting in the 1930s after the passage of the Federal Home Loan Bank Act as a way to allow a greater percentage of Americans to own their homes. Thrifts have become increasingly similar to banks over time.
17. Kevin J. Stiroh and Jennifer P. Poole, “Explaining the Rising Concentration of Banking Assets in the 1990s,” Current Issues in Economics and Finance 6, no. 9, August 2000, https://pdfs.semanticscholar.org/5b0b/6879f388106468e74380414b60a9a565a4f4.pdf .
18. “FDIC Community Banking Study,” Federal Deposit Insurance Corporation , December 2012, pp. I–II, https://www.fdic.gov/regulations/resources/cbi/report/cbi-full.pdf .
19. Supervisory Insights 13, no. 1 (Summer 2016): 3, https://www.fdic.gov/regulations/examinations/supervisory/insights/sisum16/si_summer16.pdf .
20. Andrew Martin, “In Hard Times, One New Bank (Double-Wide),” New York Times , August 2010, http://www.nytimes.com/2010/08/29/business/29bank.html .
21. John J. Maxfield, “The New Crop of De Novo Banks,” BankDirector.com , April 5, 2017, http://www.bankdirector.com/magazine/archives/2nd-quarter-2017/new-crop-de-novo-banks ; Note: This may underestimate the actual influx of new banks as the FDIC did encourage new entrants to buy the charters of troubled banks, with some positive results.
22. Yan Lee and Chiwon Yom, “The Entry, Performance, and Risk Profile of De Novo Banks,” FDIC-CFR Working Paper , no. 2016-03 (April 2016), https://www.fdic.gov/bank/analytical/cfr/2016/wp2016/2016-03.pdf .
23. Jeff Bater, “Low Interest Rates to Blame for Few Bank Startups, FDIC Says,” Bloomberg Law Banking , July 14, 2016, https://www.bna.com/low-interest-rates-n73014444685/ .
24. Charles S. Morris and Kristen Regehr, “What Explains Low Net Interest Income at Community Banks?,” Consolidated Reports of Condition and Income, https://www.communitybankingconnections.org/articles/2015/q2/what-explains-low-net-interest-income .
25. “FDIC Community Banking Study,” Federal Deposit Insurance Corporation , December 2012, pp. III–IV, https://www.fdic.gov/regulations/resources/cbi/report/cbi-full.pdf .
26. Ruth Simon and Coulter Jones, “Goodbye, George Bailey: Decline of Rural Lending Crimps Small-Town Business,” The Wall Street Journal , December 25, 2017, https://www.wsj.com/articles/goodbye-george-bailey-decline-of-rural-lending-crimps-small-town-business-1514219515 .
27. Hoai-Luu Q. Nguyen, “Do Bank Branches Still Matter? The Effect of Closings on Local Economic Outcomes,” MIT Economics, December 2014, http://economics.mit.edu/files/10143 .
28.Ibid.
29. Oliver E. Williamson, “Hierarchical Control and Optimum Firm Size,” Journal of Political Economy 75, no. 2 (April 1927): 123–138, https://www.journals.uchicago.edu/doi/10.1086/259258 .
30. Rebel A. Cole, Lawrence G. Goldberg, and Lawrence J. White, “Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks,” Journal of Financial and Quantitative Analysis 39, no. 2 (June 2004): 227–251, https://condor.depaul.edu/rcole/Research/Cole.Goldberg.White.JFQA.2004.pdf .
31. “Small Business Lending Survey,” FDIC , November 1, 2017, https://www.fdic.gov/communitybanking/2017/2017-11-01-sbls.pdf .
32. John H. Cushman, Jr., “Credit Markets; Secondary Market Is Sought,” New York Times , March 29, 1993, http://www.nytimes.com/1993/03/29/business/credit-markets-secondary-market-is-sought.html?mcubz=3 .
33. Kenneth Temkin and Roger C. Kormendi, “An Exploration of a Secondary Market for Small Business Loans,” Small Business Administration Office of Advocacy , April 2003, 12–13, http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.186.8863&rep=rep1&type=pdf .
34. “Fall 2013 Small Business Credit Survey,” Federal Reserve Bank of New York , September 2013, https://www.newyorkfed.org/medialibrary/interactives/fall2013/fall2013/files/full-report.pdf .
Chapter 5
1. Karen Gordon Mills and Brayden McCarthy , “The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game,” Harvard Business School Working Paper , no. 15-004 (2014), http://www.hbs.edu/faculty/Publication%20Files/15-004_09b1bf8b-eb2a-4e63-9c4e-0374f770856f.pdf .
2.Note: The variation in the data may be due to differences in the types of small businesses sampled or in the way the questions about accessing credit were asked.
3. Jacob Jegher and Ian Benton, “Build, Buy, Partner, and Beyond: How Alternative Lending is Reshaping Small Business Lending,” Javelin Strategy , May 16, 2016, https://www.javelinstrategy.com/coverage-area/%E2%80%98build-buy-or-partner%E2%80%99-and-beyond .
4. “2017 Small Business Credit Survey: Report on Employer Firms,” Federal Reserve Banks , May 2018, p. 6, https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2018/sbcs-employer-firms-report.pdf .
5. “2016 Small Business Credit Survey: Report on Employer Firms,” Federal Reserve Banks , April 2017, p. 12, https://www.newyorkfed.org/medialibrary/media/smallbusiness/2016/SBCS-Report-EmployerFirms-2016.pdf .
6. “Joint Small Business Credit Survey Report 2014,” Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia, 2014, p. 6. https://www.newyorkfed.org/medialibrary/media/smallbusiness/SBCS-2014-Report.pdf .
7. “2016 Small Business Credit Survey: Report on Startup Firms,” Federal Reserve Banks , August 2017, https://www.newyorkfed.org/medialibrary/media/smallbusiness/2016/SBCS-Report-StartupFirms-2016.pdf .
8. “2016 Small Business Credit Survey: Report on Startup Firms,” Federal Reserve Banks , August 2017, p. 7, https://www.newyorkfed.org/medialibrary/media/smallbusiness/2016/SBCS-Report-StartupFirms-2016.pdf .
9. Ruth Simon and Paul Overberg, “Funding Sources Shift for Startups,” Wall Street Journal , September 28, 2016, http://www.wsj.com/articles/funding-sources-shift-for-startups-1475095802?tesla=y .
10.Interview with Linda Pagan, August 2, 2018.
11. Note: The SBA has a portfolio of nearly
$100 billion of guarantees, with a loss rate of less than 5 percent, indicating that there is a significant set of worthy small businesses in the market that might not otherwise qualify for loans. Since the cost of the losses is generally covered by SBA fees, the federal budget impact of this significant program is close to zero. The program is a great example of a public-private partnership that takes advantage of bank expertise to provide more access and opportunity for small businesses at little government expense. This is a useful model to consider for other market gaps or social purposes, and the program has been copied by other nations in order to better support their small business sectors.
Chapter 6
1. Michael Riordan and Lillian Hoddeson, Crystal Fire: The Invention of the Transistor (W. W. Norton, 1997), 254.
2. Joseph Alois Schumpeter , Business Cycles (New York: McGraw-Hill, 1939).
3. Joseph Schumpeter, Capitalism, Socialism and Democracy (New York: Routledge, 2010), 83.
4. Joseph Alois Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (New Brunswick, NJ: Transaction Books, 1911), 66.
5. Rebecca Henderson, “Developing and Managing a Successful Technology & Product Strategy: The Industry Life Cycle as an S Curve,” The Co-Evolution of Technologies and Markets, Cambridge, MA, 2005, www.mit.edu/people/rhenders/Teaching/day1_jan05.ppt .
6. Priya Ganapati, “June 4, 1977: VHS Comes to America,” Wired , June 4, 2010, https://www.wired.com/2010/06/0604vhs-ces/ .
7. “Check Clearing for the 21st Century Act (Check 21),” Federal Deposit Insurance Corporation , last modified April 3, 2017, https://www.fdic.gov/consumers/assistance/protection/check21.html .
8. “FDIC Quarterly Banking Profile,” Federal Deposit Insurance Corporation , accessed September 14, 2018, https://www.fdic.gov/bank/analytical/qbp/ .
9. Brian Riley, “Small Business Credit Cards Have Plenty of Growth Potential in the U.S.,” Mercator Advisory Group , March 14, 2018, https://www.mercatoradvisorygroup.com/Templates/BlogPost.aspx?id=6866&blogid=25506 .
10. “FDIC Quarterly Banking Profile,” Federal Deposit Insurance Corporation , accessed September 14, 2018, https://www.fdic.gov/bank/analytical/qbp/ .
11. “Total Consumer Credit Owned and Securitized, Outstanding,” FRED Economic Data , accessed March 23, 2018, https://fred.stlouisfed.org/graph/?id=TOTALSL .
12. “Real Estate Loans: Residential Real Estate Loans, All Commercial Banks,” FRED Economic Data , https://fred.stlouisfed.org/graph/?id=RREACBW027SBOG .
13. “Annual Report 2017,” JPMorgan Chase & Co., April 2018, p. 14, https://www.jpmorganchase.com/corporate/investor-relations/document/annualreport-2017.pdf .
14. Parris Sanz, “CAN Capital Celebrates 20 Years,” CAN Capital , March 21, 2018, https://www.cancapital.com/resources/can-capital-celebrates-20-years/ .
15. Rip Empson, “Smart Lending: On Deck Gives Your Startup a Credit Score So You Can Secure a Loan,” TechCrunch , May 19, 2011, https://techcrunch.com/2011/05/19/smart-lending-on-deck-gives-your-startup-a-credit-score-so-you-can-secure-a-loan/ .
16. Karen Gordon Mills and Brayden McCarthy , “The State of Small Business Lending: Innovation and Technology and the Implications for Regulation,” Harvard Business School Working Paper , no. 17-042, 2016, http://www.hbs.edu/faculty/Publication%20Files/17-042_30393d52-3c61-41cb-a78a-ebbe3e040e55.pdf .
17. Michael Erman and Joy Wiltermuth, “Lending Club CEO Resigns After Internal Probe, Shares Plummet,” Reuters , May 9, 2016, https://www.reuters.com/article/us-lendingclub-results-idUSKCN0Y01BK .
18. Leena Rao, “Once-Hot Online Lending Companies Go Cold in Face of Skepticism,” Fortune , July 1, 2015, http://fortune.com/2015/06/30/lending-club-ondeck-shares/ .
19. Kristine McKenna, “Lots of Aura, No Air Play,” Los Angeles Times , May 23, 1982, L6.
Chapter 7
1.LendIt Archives, Courtesy of Peter Renton, accessed March 13, 2018.
2. “LendIt 2013 Official Conference Report,” LendIt Blog , August 24, 2013, http://blog.lendit.com/lendit-2013-official-conference-report/ .
3. Peter Renton, “Wrap-Up of the 2014 LendIt Conference,” Lend Academy , May 9, 2014, https://www.lendacademy.com/wrap-up-of-the-2014-lendit-conference/ .
4. “The LendIt Story,” Lendit Conference , 2018, http://www.lendit.com/about .
5. “LendIt USA 2015: Agenda at a Glance,” Lendit USA , 2015, https://s3-us-west-2.amazonaws.com/lendit/agendas/usa-2015-agenda.pdf .
6. Travis Skelly, “Larry Summers’ Full-throated Endorsement of Online Lending,” FinTech Collective , April 16, 2015, http://news.fintech.io/post/102ceyr/larry-summers-full-throated-endorsement-of-online-lending .
7.Interview with Frank Rotman, April 13, 2018.
8. Rolin Zumeran, “The History of APIs and How They Impact Your Future,” OpenLegacy Blog , June 7, 2017, http://www.openlegacy.com/blog/the-history-of-apis-and-how-they-impact-your-future .
9. “Open Banking’s Next Wave: Perspectives from Three Fintech CEOs,” Business a.m. , September 10, 2018, https://www.businessamlive.com/open-bankings-next-wave-perspectives-from-three-fintech-ceos/ .
10. Parris Sanz, “CAN Capital Celebrates 20 Years,” CAN Capital , March 21, 2018, https://www.cancapital.com/resources/can-capital-celebrates-20-years/ .
11. Note: APR refers to an Annual Percentage Rate, or what most think of as an “interest rate.” This number represents the percent interest paid on a loan over the course of a year. Because MCAs are repaid using a percentage of a business’s sales receipts, they could be repaid in a shorter timeframe than a year. However, since the repayment amount is fixed, the calculation of APR can be quite high if the loan is repaid in a short time frame. As a result, some argue that APRs unfairly represent the true cost of MCA loans. Nonetheless, APRs remain the standard for interest rate disclosures and comparisons.
12. Jackson Mueller, “U.S. Online, Non-Bank Finance Landscape,” Milken Institute Center for Financial Markets , Curated through May 2016, http://www.milkeninstitute.org/assets/PDF/Online-Non-Bank-Finance-Landscape.pdf .
13. “ Lending Club Launches Business Loans,” LendingClub , accessed March 27, 2018, https://blog.lendingclub.com/lending-club-launches-business-loans/ .
14. Julapa Jagtiani and Catharine Lemieux, “Small Business Lending: Challenges and Opportunities for Community Banks,” Philadelphia Fed Working Paper , no. 16-08 (March 2016), https://philadelphiafed.org/-/media/research-and-data/publications/working-papers/2016/wp16-08.pdf .
15. Kabbage, accessed September 17, 2018, https://www.kabbage.com/ .
16.Interview with Kathryn Petralia, March 19, 2018.
17. Miranda Eifler, “The OnDeck Score: Making Targeted Small Business Lending Decisions in Real Time,” accessed March 27, 2018, https://www.ondeck.com/resources/ondeckscore .
18. Jackson Mueller, “U.S. Online, Non-Bank Finance Landscape,” Milken Institute Center for Financial Markets , Curated through May 2016, http://www.milkeninstitute.org/assets/PDF/Online-Non-Bank-Finance-Landscape.pdf .
19. OnDeck, accessed April 18, 2018, https://www.ondeck.com/company .
20.Interview with Peter Renton, March 28, 2018.