State of SME Finance in the United States in 2015

Transcription

Capital for Globalizing Companies
State of SME Finance in the
United States in 2015
This report was prepared by Shahin Firoozmand, Philip Haxel, Euijin Jung, and Kati Suominen.
TradeUp Capital Fund and Nextrade Group, LLC
March 2015
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Executive Summary
Small and medium-sized enterprises (SMEs), firms with fewer than 500 employees, are the
backbone of U.S. economy. They make up 99 percent of all firms, employ over 50 percent of
private sector employees, and generate 65 percent of net new private sector jobs. SMEs
account for over half of U.S. non-farm GDP, and represent 98 percent of all U.S. exporters and
34 percent of U.S. export revenue.
To thrive, SMEs need access to credit and cash flow. Credit conditions for SMEs deteriorated
drastically in the wake of the financial crisis. However, even if not matching pre-crisis levels,
SMEs’ loan availability improved notably in 2014. Small business owners are also more
optimistic than a year ago about their economic prospects and the availability of credit.
Venture capital investments also recovered significantly in 2014, and were particularly robust
for companies seeking expansion capital.
This White Paper deepens on the state of SME finance in the United States in 2015. We review
trends in lending and equity financing to SMEs, discuss emerging financing sources for SMEs,
and assess the future of SME finance in light of the rise of alternative, online lenders and
crowdfunding platforms. We also analyze the specific financing issues faced by SMEs that seek
growth through exports.
The summary highlights of this report are as follows:

Bank lending to SMEs has improved, but has yet to return to pre-crisis levels. In
December 2014, the latest date for which data is available, the loan balances for
commercial and industrial (C&I) loans of $1 million or less stood at $302.6 billion, $34
billion below the levels of June 2008 preceding the Great Recession.

Business owners appear more upbeat about their funding prospects than a year ago. In
the January 2015 Wells Fargo/Gallup quarterly survey of 600 small business owners,
34% of respondents stated that it was somewhat or very easy to obtain credit over the
past 12 months, up from 28 percent in January 2014.

Federal government sources have played a complementary and to an extent
countercyclical role during the past few years in SME lending. In FY 2014, the Small
Business Administration (SBA) supported $29.6 billion in lending to small businesses,
with its 7(a) loans topping the levels of the prior two years. The Export-Import Bank
supported export credit insurances and export working capital for SMEs at $5.1 billion in
2014, somewhat below authorizations in 2011-13. SBA-backed Small Business
Investment Company (SBIC) financings increased to $3.4 billion in 2013, the latest year
for which data are available and a five-year high.
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
Several online lending platforms have sprung up in the wake of the recession to offer
small businesses relatively quickly disbursing credit, typically for loans of less than
$250,000. According to estimates, online lending platforms loaned record $8.6 billion in
2014.1 One element of uncertainty in the sector is potential future government
regulation.

In terms of venture capital investments, 4,356 deals received $48.3 billion in 2014,
highest since the dot com boom of 2000, according to the MoneyTree™ Report by
PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association
(NVCA). Internet and software deals dominated. Expansion-stage deals received the
greatest amounts of investment, while early-stage deals dominated the number of
deals.

Angel investment has become a strong complement to venture capital. In the first two
quarters of 2014 for which data are available, angels invested a total of $10.1 billion, an
increase of 4.1 percent over the first half of 2013.

Crowdfunding, which enables companies to raise donations, debt, and equity from
individual and institutional investors, gained steam in 2014. According to recent
estimates, the global crowdfunding industry has grown explosively to nearly $10 billion
in 2014 from $1 billion in 2010. Some estimates put crowdfunding at $500 billion in
2020.
As the U.S. economy recovers, 2015 can be a year of further recovery in bank lending to SMEs.
However, due to regulatory constraints, bank lending especially to small businesses will unlikely
rise above pre-crisis levels. Alternative sources, such as online lenders and equity
crowdfunding, are well-placed to secure wider acceptance in the market, contingent on
developments in the regulatory landscape. While there are concerns about a new tech bubble
that would undercut VC investments, evidence so far indicates these concerns may be
overblown.
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2015 State of SME Finance in the United States
Introduction
Small and medium-sized enterprises (SMEs), firms with fewer than 500 employees, are the
backbone of U.S. economy and employment. They make up 99 percent of all firms, employ over
50 percent of private sector employees, and generate 65 percent of net new private sector
jobs. America’s 28 million SMEs account for over half of U.S. non-farm GDP. SMEs are also
prominent in exports: SME exporters represent 98 percent of all U.S. exporters and about 35
percent of U.S. export revenue.
To grow and contribute to the U.S. economy and exports, SMEs need access to free cash flow
and credit. Academic studies show that financing is the single most robust determinant of firm
growth.2 However, small firms consistently report higher financing hurdles than large
enterprises given their small size, limited assets, and general inability to raise funds through
credit markets or publicly traded equity.3 Given that SMEs tend to have greater volatility in
earnings and growth than do larger companies, they are seen as riskier investments, and thus
subject to higher cost of capital.4 In addition, with limited staff and time, SMEs have high
opportunity costs to cultivate relationships with lenders and investors, or to diversify these
relationships so as to shop around for the best deal.
Credit conditions for U.S. SMEs deteriorated in the wake of the financial crisis, and have
remained damp as the regulatory environment has tightened and venture capital has remained
quite subdued and focused on later-stage companies. However, the setting improved in 2014.
The purpose of this 2015 annual update is to take stock of SME finance in the United States by
reviewing trends in lending and equity financing to SMEs over the past 15 years, discuss
emerging capital sources for SMEs, and assess the future of SME finance in light of regulatory
changes and emerging economic trends. Some data presented here also include the first few
months of 2015.
The first section analyzes the importance of capital for SMEs’ growth and trade. Section two
assesses lending to SMEs in the past several years, while section three discusses loans, loan
guarantees, and other instruments issued by the SBA and Ex-Im Bank to SMEs. Section four
highlights the rise of online lending platforms, mapping out some of the key providers. Section
five focuses on venture capital and private equity transactions while section six reviews trends in
angel investment. Section seven discusses the rise of crowdfunding. Section eight concludes.
1. Importance of Capital to SMEs’ Growth and Trade
SMEs in the United States have been recovering from the financial crisis, and, over the past three
years, created more jobs than they have shed (figure 1). Capital is the oxygen that enables SMEs
invest, market their goods and services, expand production capacity, and sustain cash flow. As
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SMEs rebound, they are looking to invest. In its August 2014 survey, the Federal Reserve Board
of New York (FRBNY) found that SMEs’ appetite for credit had increased somewhat from 2013
levels, with some 40 percent of SMEs seeking credit (figure 2). In a Wells Fargo/Gallup quarterly
survey of 600 small business owners with up to $20 million in annual sales, the share of small
business owners who intend to increase capital investments over the next 12 months increased
to 31 percent in January 2015 from 27 percent in January 2014, to match January 2008 levels.5
At the same time, SMEs are widely viewed as having more limited access to capital than large
companies. When asked to name the most severe obstacles to growth in a recent survey by 49
percent of 670 surveyed SMEs listed access to capital as their leading challenge. No other
challenge such as taxes, finding employees, or regulations, was as widely cited.
The challenges in accessing capital have a number of reasons. Given their typically higher
volatility and less extensive financial track record, SMEs are generally more credit-constrained
than are large firms. SMEs tend to have fewer external financing sources available to them and
are typically much more dependent on banks than are larger firms, which can raise capital
through such measures as issuance of bonds, commercial paper, or publicly traded equity. For
lenders, it takes typically as much work, if not more, to assess the creditworthiness of a small
borrower as a large one, particularly as smaller firms tend to have less financial history and fewer
formal financial tracking processes.
Smaller businesses in particular still rely on savings and credit cards, and, when available, loans
to capitalize themselves. According to Kauffman Foundation survey data on 5,000 young firms,
35 percent of these firms’ capital came from loans, 30 percent from personal savings, 6.3
percent from friends and family, and 6.2 percent from credit cards. Angel investments and
venture capital made up only a tenth of the total.6 Other surveys yield very similar results.
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Figure 1 - Net Job Gains or Job Losses by Firm Size (‘000 Jobs)
Source: Bureau of Labor Statistics.
Figure 2 – SMEs’ Credit Application in 2013-14
Source: FRBNY Small Business Credit Survey, August 2014 (N=782 in 2014, N=693 in 2013).
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2. Bank Lending to SMEs: Cautious Optimism Going into 2015
The 2008-09 financial crisis severely undermined SMEs’ credit conditions, and credit has
remained tight for the past several years. Some drivers of these trends include bank
consolidation, which has reduced the number of banks focused on the small business segment,
and increased regulatory scrutiny that has caused banks to tighten lending standards and
secure more internal approvals. This, in turn, has reduced the share of creditworthy borrowers
and increased banks’ fixed costs per loan, making SME loans less attractive. 7 Research on the
heightened supervision during and after the 2008-09 recession finds that increased stringency
can have a statistically significant impact on total loans and loan capacity for some 20 quarters
after the onset of the tighter supervisory standards.8
Granted, banks have not been the only bottleneck: small businesses have also been borrowing
less in the past few years, as weak earnings and economic uncertainty have translated into
subdued loan demand.9 In addition, collateral values have been low as real estate prices have
declined, curtailing the amount that small business owners can borrow.
Positively, bank lending to SMEs improved in 2014, even if it did not return to pre-crisis levels.
In December 2014, loan balances for commercial and industrial (C&I) loans of $1 million or less
stood at $302.6 billion, $34 billion below June 2008 preceding the Great Recession (figure 3).
The total number of small business loans has been increasing from 2009-2011 levels (figure 4).
Figure 3 - Loans to Small Businesses by FDIC-Insured Institutions in 2000 – 2014, by Loan Size
(in $ million)
Source: FDIC.
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Figure 4 - Loans to Small Businesses by FDIC-Insured Institutions in 2000 – 2014, by Number of
Loans in Loan Size Category
Source: FDIC.
Other data echo these trends. According to the January 2015 Biz2Credit Small Business Lending
Index, the largest banks with over $10 billion in assets approved 21.3 percent of loan
applications, up from 17.8 percent in January 2014 (figure 5).10 Community banks are approving
49.6 percent of loan applications, only slightly down from 50.9 percent in January 2014.
Alternative lenders approved 61.6 percent of loan applications in January 2015, down from 64.1
percent a year prior.
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Figure 5 – Loan Approval Rates by Different Types of Lenders, 2011-15
Source: Biz2Credit Small Business Lending Index, various years.
2.1 Perceptions of Loan Availability
According to the Federal Reserve Board of Governors, banks have recently viewed the lending
conditions to businesses as having improved (figures 6-8). The net percentage of banks that see
a tightening for small business C&I loans improved in January 2015 to negative 5.7 percent from
negative 13.7 percent in early 2014. However, the net percentage of respondents reporting
stronger demand for C&I loans in January 2015 was positive 5.7 percent, less than 14.1 percent
a year ago. Overall, banks are more subdued about SMEs’ credit environment than about
opportunities for large companies to access credit.
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Figure 6 - Net Percentage of Domestic Respondents Tightening Standards for C&I Loans, 19902015
100%
80%
60%
40%
20%
0%
-20%
2/1990
1/1991
4/1991
3/1992
2/1993
1/1994
4/1994
3/1995
2/1996
1/1997
4/1997
3/1998
2/1999
1/2000
4/2000
3/2001
2/2002
1/2003
4/2003
3/2004
2/2005
1/2006
4/2006
3/2007
2/2008
1/2009
4/2009
3/2010
2/2011
1/2012
4/2012
3/2013
2/2014
1/2015
-40%
Large and medium business
Small business
Source: Federal Reserve Board.
Figure 7 - Net Percentage of Domestic Respondents Increasing Spreads of Loan Rates over
Banks' Cost of Funds, 1990-2015
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
2/1990
1/1991
4/1991
3/1992
2/1993
1/1994
4/1994
3/1995
2/1996
1/1997
4/1997
3/1998
2/1999
1/2000
4/2000
3/2001
2/2002
1/2003
4/2003
3/2004
2/2005
1/2006
4/2006
3/2007
2/2008
1/2009
4/2009
3/2010
2/2011
1/2012
4/2012
3/2013
2/2014
1/2015
-80%
Small business
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Figure 8 - Net Percentage of Domestic Respondents Reporting Stronger Demand for C&I
Loans, 1990-2015
60%
40%
20%
0%
-20%
-40%
-60%
-80%
Small business
Business owners appear more upbeat as well. In an August 2014 survey, the FRBNY found that a
larger share of SMEs found credit “sufficient” in 2014 than in 2013, and fewer were discouraged
or debt-averse (figure 9). The January 2015 Wells Fargo/Gallup quarterly survey of 600 small
business owners echoed these trends: 34 percent of survey respondents stated that it was
somewhat or very easy to obtain credit over the past 12 months, up from 30 percent in
November 2014, and 28 percent in January 2014.11 Meanwhile, some 20 percent of small
businesses stated that credit had become somewhat or very difficult to obtain in the past 12
months, a significant improvement from 2013, even if not at the 10 percent level in early 2008
(figure 10).
A Greenwich Associates survey for Q4 2014 found even more upbeat results.12 More than 80
percent of mid-sized companies and 70 percent of small businesses said they are satisfied with
their banks and are not currently seeking a new provider – significantly higher numbers than in
Q4 2013 (62 percent for mid-sized companies and 58 percent for small businesses).
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Figure 9 – SMEs’ View of Availability of Credit in 2013-14
Source: FRBNY Small Business Credit Survey, August 2014 (N=782 in 2014, N=693 in 2013).
Figure 10 – SMEs’ Perceived Difficulty of Obtaining Credit in the Past 12 Months, 2003-2015
Source: Wells Fargo and Gallup Small Business Survey Topline Quarter 1, 2015 (margin of error ± 4 percentage
points).
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The share of small business members of the National Federation of Independent Businesses
(NFIB) who said they borrowed in the past three months increased from 28 percent in
November 2013 to 33 percent in November 2014, similar level as in 2009. At the same time,
the majority of SMEs still consider it harder to secure loans (figure 11). In November 2014, the
net share of small business owners that saw credit conditions as being easier than three
months ago was negative 5 percent (that is, 5 percent more of the surveyed thought credit was
harder to get than three months ago), similar level as preceding months, even if much better
than in 2009-11.13 In January 2015, the net percent of SMEs owners expecting credit conditions
to ease in to coming months was negative 5 percent, in contrast to some 11 percent in early
2011.
Figure 11 – SMEs’ Perceived Availability of Loans – Net Percent (“Easier” Minus “Harder”)
Compared to Three Months Ago, 2008-November 2014
Source: NFIB Small Business Economic Trends Monthly Report, December 2014.
While these trends are positive, there is also broad consensus that banks in particular are and
will be held back by regulatory pressures, that imply heighted capital requirements that limit
small business lending, and higher regulatory hurdles for banks to determine the credit
worthiness of loans. Particularly larger banks, that have the highest credit capacity in U.S. credit
markets, are growing more conservative in their loan determinations.
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3. Government Financing of SMEs: SBA, SBICs, and Export-Import Bank
3.1
Small Business Administration Loans
The SBA has played somewhat of a countercyclical role as bank lending to small business has
dried up. In FY 2014, SBA supported $29.9 billion in lending to small businesses, at a par with
2011 levels (figure 12). SBA also supported $1.3 billion worth export-related loans. In total, the
SBA supported nearly 58,000 loans in 2014, supporting about 51,000 companies.14 Among
others, this included $19.2 billion in its general, 7(a) loans with maximum amount of $5 million;
$4.1 billion in 504 loans aimed to provide small businesses with long-term, fixed-rate financing
to acquire real estate and major fixed assets; and $54 million in microloan of up to $50,000 to
help small businesses and certain not-for-profit childcare centers start up and expand.
Figure 12 – SBA-Supported Loans to Small Businesses in 2010-2014
Source: SBA Annual Report for FY 2014.
3.2 SBIC (Small Business Investment Company) Financing
The Small Business Investment Company (SBIC) program run by the Office of Investment and
Innovation of the SBA has financed small businesses for their sustainable growth as well as job
creation across the United States. In 2013, America’s 1,068 SBICs invested and loaned $3.4
billion, an increase of 8 percent from 2012 (figure 13). The total accumulated amount of SBIC
financing in 2009-2013 is $13.5 billion.
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Figure 13 - Amount and Number of SBIC Financings, 2009-2013
Source: Annual Report for the Small Business Investment Company (SBIC) Program, Sep 2013.
SBICs’ instruments include debt, equity, and mezzanine debt with equity features such as
warrants. Loans accounted for 60 percent of SBIC financings in 2013, increasing by 271 percent
from $600 million in 2009 to $2.1 billion in 2013, likely in reflection of the dampened bank
lending (figure 14). Equity investments dropped slightly by 1 percent to $568.5 million in 2013.
Mezzanine debt allocations increased by 16 percent, from $718.2 million in 2009 to $834.1
million in 2013.
Figure 14 - SBIC Financing by Type, 2009 and 2013
Source: Annual Report for the Small Business Investment Company (SBIC) Program, Sep 2013
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Most of SBIC financing has gone to businesses with less than $5 million in net income. In 200913, 55.1 percent of all SBIC financing directly went to businesses with less than $1 million in net
income and 37.7 percent to businesses between $1 million and $5 million in net income (figure
15). The average size of SBIC investments and loans has increased substantially, from $1.25
million in 2009 to $3.27 million in 2013.
Figure 15 - Distribution of SBIC Financing Dollars by Portfolio Company Net Income, 2013 ($
million)
In terms of regional distribution, the Mid-Atlantic has the largest share at 19 percent of total
allocation in 2009-13; small businesses in this region received $2.6 billion in total during the
period. South Atlantic comes in the second place with $2.4 billion (or 17.8 percent), followed by
Pacific (15.6 percent), East North Central (11.4 percent), West North Central (11 percent), New
England (8.9 percent), Mountain (7.5 percent), West South Central (5.2 percent), and East
South Central (3.6 percent) (figure 16).
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Figure 16 - Distribution of SBIC Financing in FY 2009-2013, by Geography
Of industries, manufacturing companies received the largest share with $3.5 billion in total,
representing 26 percent of all SBIC financings. Professional, scientific and technical services
came next (14 percent), followed by information technologies (12 percent), transportation and
warehousing (8 percent), health care and social assistance (7 percent), and wholesale trade (7
percent) (figure 17).
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Figure 17 - Distribution of SBIC Financing Dollars in FY 2009-2013, by Industry
3.3
Export-Import Bank Guarantees and Instruments
The U.S. Export-Import Bank (Ex-Im) supports small business export transactions by offering
export credit insurance, working capital guarantees, and direct loans, particularly to SMEs’
foreign customers. In 2014, Ex-Im authorized a record 3,746 small business transactions, of
which the bulk, or 89.4 percent, were export credit insurances rather than working capital loan
guarantees (figure 18). Ex-Im authorizations supported $5.1 billion in small business loans, of
which 57 percent went to export credit insurance and 35 percent towards working capital loan
guarantees (figure 19).
Overall, in dollar terms, Ex-Im’s small business portfolio is about a fourth of its total portfolio;
however, in numbers, small business transactions make up over 80 percent of Ex-Im’s
transactions (figure 20). Ex-Im transactions overall support only a small share of U.S. exports,
typically 1-2 percent.
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Figure 18 – Number of Ex-Im Bank-Supported Export-Related Loan Authorizations to Small
Businesses in 2000-14
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Export Credit Insurance
Working Capital Guarantees
Guarantees and Direct Loans
Source: Ex-Im Bank annual reports, 2000-14.
Figure 19 – $ Value of Ex-Im Bank-Supported Export-Related Loan Authorizations to Small
Businesses in 2000-14, (in $ millions)
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Export Credit Insurance
Working Capital Guarantees
Guarantees and Direct Loans
Source: ExIm Bank annual reports, 2000-14.
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Figure 20 – ExIm Bank-Supported Export-Related Loan Authorizations to Small Businesses in
2000-14 as % of all Authorizations
Source: ExIm Bank annual reports, 2001-2014.
Small businesses often lack awareness of federal programs aimed at exporters. In a 2013 survey
by the National Small Business Association (NSBA), as many as 82 percent of small businesses
already engaged in exporting reported that their lending institution never discussed U.S. ExportImport Bank products with them, and some 22 percent had never even heard of the Ex-Im Bank.16
Only 12 percent reported using an Ex-Im product to help finance their export activities, and just
5 percent had used Ex-Im financing through a commercial bank. In addition, a mere 3 percent
had made use of SBA’s export lending programs.
4. Remaking SME Finance: Rise of Online Nonbank Lenders
The market for SME finance has changed substantially since the financial crisis. As traditional
sources of small business credit have failed to meet the demand, a vibrant market of online
lending platforms has sprung up. These platforms offer speed and higher odds of success than
traditional lenders, using proprietary analytics to approve some 60 percent of the loan
applications they receive, typically within minutes or a few days. In 2014, over $8.6 billion in
loans was financed through online lending platforms, a larger number than all previous years
combined.17
Online lenders typically use a different set of criteria than do traditional lenders to assess the
borrower’s credit worthiness, such as the business owners’ credit card payment records, or
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social media feedback on websites like Twitter and Yelp. They come in various forms – some,
such as OnDeck and Kabbage, use balance sheets to issue loans; others, such as Biz2Credit and
Fundera, connect borrowers with lenders; still others such as Lending Club and Funding Circle,
connect prime and super-prime quality borrowers to capital from various sources (table 1).18
Table 1 – Select Online Small Business Lenders, by Type
Online Balance Sheet
Model
Loans to
Date
APR
Terms
VCs
Marketplaces
P2P Platforms
Use Balance sheet capital to
decision loans via new risk
scoring algorithms that
include non-trad data
Connect borrowers with
range of traditional and
alternative lenders, incl. big
banks, SBA, new players
Connect prime and superprime quality borrowers with
capital from consumers, int'l
investors
Est. $1.5B as of 4Q13
N/A
East. $4.78 as of 4Q13
20-50 percent
Wide variation given range of
products and lenders
9-12 percent
6-12 months on average;
focused on new loans
Wide variation given range of
products and lenders
3 year or 5 year; largely
focused on refinancing of
credit card debt
Google Ventures, First
Round, Tiger, SAP Capital
Khosla Ventures, First
Round Capital, Square 1
Khosla Ventures, Kleiner
Perkins, General Atlantic
Source: Mills and McCarthy. 2014. “The State of Small Business Lending: Credit Access during the Recovery and
How Technology May Change the Game.”
There have been two IPOs by two online lenders, both in December 2014. The first was by
Lending Club, an online P2P marketplace, which was recently valued at $5.4 billion. Its business
model revolves around loans targeted towards individuals or small businesses, typically up to
$35,000. By connecting small businesses that cannot access loans through traditional credit
providers to alternative lenders of varying size and scale, Lending Club can offer interest rates
that are typically several percentage points cheaper than the alternative of borrowing via credit
card.19
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Other P2P lenders, such as Dealstruck, have focused solely on the small business market,
offering larger loans of $50,000-250,000 for up to 3 year terms with interest rates of 5-15
percent. Granted, all of these lenders require businesses to meet certain criteria, such as cash
flow, profitability, certain amount of time in business, and so on.
The second IPO was by OnDeck, a direct loan provider, at a valuation of $1.3 billion. In contrast
to peer-to-peer lenders, OnDeck draws from its own balance sheet, relying on credit from a mix
of small investors and larger institutions to offer small business loans of up to $250,000 across
industries. OnDeck’s core advantage is the expediency with which it can make loans, a crucial
element for small businesses. OnDeck’s applications can be completed in under 10 minutes;
meanwhile, the paperwork for a bank loan can take as long as 25 hours to complete. Using a
host of cutting-edge analytical techniques, OnDeck can make a decision within minutes of
receiving an application, and can transfer money to the borrower’s account within days.20 In
exchange for the speed and convenience, borrowers typically pay a premium in the form of
higher interest rates.
Other emerging online lenders include intermediaries such as Biz2Credit, Fundera, and Boefly
that match small businesses to lenders across the nation, as well as non-profit models, such as
microlender Accion (table 2).
Further applications in the online space include Kabbage, which provides accounts receivable
financing against domestic and foreign receivables, and Lighter Capital, which focuses on highgrowth software and tech firms, offering royalty-based loans that accommodate fluctuations in
the company’s cash flows. Royalty-based approaches will likely grow more prominent in the
future.
There are also specialized lenders serving a defined clientele. For example, in the fall of 2013,
Paypal started extending small business working capital loans to its merchants. Also Google
reportedly has plans to lend to small businesses.
A notable longer-term trend favoring online platforms is the growth in the number of
entrepreneurs using mobile phones to apply for funding – which is something that the nontraditional lending platforms are better-equipped to accommodate than are traditional lenders.
Online platforms have attracted institutional investors through high yields of 5-12 percent or
greater. However, it is also the case that online lenders are still working to find sustainable
business models. While groups like Lending Club and OnDeck have garnered a great deal of
interest, neither have turned a profit as of Q3 2014.21
The growth of online platforms will also be tested as regulations evolve. Though offering many
more alternatives to small businesses to raise capital, online lenders are by some feared to
create the next subprime lending crisis. Granted, such concerns are often voiced by the more
traditional and regulated players that are growing concerned about their market share.
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Table 2 – Select Online Small Business Lenders
Provider
OnDeck
Biz2Credit
Lending
Club
Fundera
Boefly
Instruments
Loans - direct
Array of loans, lines
of credit, and other
instruments - loan
request will be
matched to the
lending criteria of
our network of over
1,200+ lenders
Business loans for
companies with 2
years of operating
history
Array of loans, lines
of credit, and other
instruments - loan
request will be
matched to the
lending criteria of
our network of
lenders, including
other platforms
Loans - loan request
will be matched to
the lending criteria
of our network of
over 3,600+ lenders
Amounts
$5,000 $250,000
Term
3 – 18 mo
(average 6
- 9 mo)
Interest
rate
15% (avg)
Payment
Sectors
Daily
Over 700
different
industries,
including
restaurants,
retailers and
other service
providers
https://w
ww.ondec
k.com/
http://ww
w.biz2cred
it.com/
$5,000 - $1
million
Varies
Varies
Varies
Various sectors
and segments
(women,
veterans, etc.)
Up to
$300,000
Varies
Starting at
5.9%
Monthly
Various
https://w
ww.lendin
gclub.com
Up to $1
million
Varies
Varies
Varies
Various sectors
and segments
https://w
ww.funder
a.com
Varies
Platform
user fee
$249
(minimum)
Varies
Typically
franchisors
http://ww
w.boefly.c
om/
10.9915.99%,
closing
costs 5%,
$135
application
fee
Varies
Established and
emerging
businesses;
start-ups;
businesses in
food, beverage,
hospitality
industries
http://ww
w.accionus
a.org/
https://w
ww.dealstr
uck.com
https://w
ww.kabba
ge.com/
Varies
Microloans
Up to $50,000
Up to 60
mo
Dealstruck
Peer-to-peer loans
$50,000$250,000
Up to 36
mo
5-15%
Varies
Manufacturing,
services,
wholesale,
retail
Kabbage
Cash advance to
buy inventory,
$500-$50,000
Flexible
2-10% in
the first 2
Monthly
Various
Accion
Website
March 2015
23
equal monthly
transfers
Paypal
Lighter
Capital
Working capital
loans
Max. 8
percent of
merchant's
annual
receipts, up to
$20,000
Royalty-based loans
$25,000$500,000, or
10-20 percent
of company's
annualized
runrate
months, 1%
thereafter
Set fee as a
deduction
of 10-30%
of incoming
receipts
until paid estimated
4-12%
interest
12-60 mo
Percent of
monthly
top-line
revenue; up
to 25%
Based on
receipts
Paypal
merchants
(90,000 firms)
https://w
ww.paypal
.com/web
apps/work
ingcapital/
tour
Monthly
Software,
technology and
knowledgebased
companies
http://ww
w.lighterca
pital.com/
A/R
Financing
Direct Loans
N/A
N/A
1-3% per
month
Monthly
Accounts
receivable
financing,
including
overseas
Funding
Circle
Market place/ P2P
$25,000$500,000
24-60 mo
9-21%
Monthly
Small Business
Fundation
Direct Loans
Working
Capital:
>$150K
Biz Expansion:
>$500K
24-48 mo
Starting at
8%
Biweekly
Small Business
(Working
Capital/Busines
s Expansion)
http://fun
dation.co
m/
Daric
Market place/ P2P
Up to $50,000
36-60 mo
7.3-28.69%
Monthly
Small
Business/Perso
nal
http://dari
c.com/
Raisework
s
Direct Loans
$10,000$250,000
4-36 mo
N/A
N/A
Small Business
IOU
Central
Direct Loans
$5,000$100,000
6-12 mo
“Market
Driven”
Daily
Small Business
Swift
Capital
Direct Loans
$5,000$200,000
3-12 mo
Starting at
9.9%
Daily
Small Business
Prosper
Direct Loans
$2,000$35,000
36-60 mo
6.7335.36%
Monthly
Small
Business/Perso
nal
March 2015
http://ww
w.account
sreceivable
financing.c
om/
https://w
ww.fundin
gcircle.co
m
https://w
ww.raisew
orks.com/
https://w
ww.ioucen
tral.com
https://w
ww.swiftca
pital.com
https://w
ww.prospe
r.com
24
Box 1 - Boosting SMEs’ Cash Flow: Rise of Supply Chain Finance
Supply Chain Finance (SCF) has existed for a long time. However, the credit constraints in the wake of the
financial crisis have made SCF an increasingly attractive option for corporate buyers to finance their SME
suppliers and fuel their product delivery.
SCF is typically initiated by a large corporate buyer to reduce supplier risk, such as inventory retention, and
maximize efficiency of working capital. Reducing supplier risk is in the interest of buyers who do not want
their supply chain threatened by inaccessibility of credit and working capital for their upstream suppliers.
Doing so is also a point of leverage for buyers. Large buyers increasingly want better terms, such as a longer
payment cycle, from their supplier while these suppliers wish to be paid as quickly as possible so as to
purchase new supplies and cover business expenses. SCF expedites payment to suppliers and defers payouts
by buyers and creates a “win-win” arrangement out of what was previously a win-lose relationship.
Typically, SMEs make up for the gap in cash flow by borrowing against their accounts receivable. However, the
terms involved in this arrangement can be very taxing on the supplier’s financial viability and depend heavily
on credit scores, which shuts out many SMEs from financing. This in turn poses a supplier risk to the buyer. In
order to preserve the supplier’s financial health, the buyer helps the SME supplier access more affordable
credit through a bank, or offers a sophisticated corporate solution that optimizes payments among many
participants in the supply chain. SCF essentially enables SME suppliers to use a corporate buyer’s credit rating
to obtain sufficient funds, as well as service the buyer in an expeditious manner.
Demand for Supply Chain Finance
According to several estimates, only a fraction of global supply chain finance needs has been met. New firms
have sprouted to specifically address this gap, such as PrimeRevenue, which provides multi-bank supply chain
finance, and Tradeshift, which enables businesses that have invoiced a large enterprise to immediately access
the money they are owed once the buyer has confirmed its intention to pay. Select other players in the
industry are JP Morgan, Ariba, GT Nexus, Invoinet, and Taulia.
Several governments, including U.S. government, have established supply chain finance initiatives in order to
incentivize uptake by corporate buyers and banks. For example, in 2011, the U.S. Export-Import Bank
approved a $740 million program to offer guarantees for up to 90 percent of that capacity to support Boeing’s
U.S. suppliers (that are also indirect U.S. exporters and hence supported by Ex-Im Bank).1 The initiative forms
part of Ex-Im Bank’s Supply-Chain Finance Guarantee Program, which enables suppliers to receive early
payment of their accounts receivable that are due from participating exporters, such as Boeing, Caterpillar,
and Case Holland in exchange for a small discount fee that is paid to the lender. Ex-Im Bank provides a 90
percent guarantee of the invoices while the lender (Citibank for Boeing suppliers) bears 10 percent of the risk.
In the UK, the government reached an agreement in September 2013 with three dozen corporations such as
Rolls-Royce, Vodafone, and General Dynamics UK to boost supply chain finance. The bank is notified by a large
company that an invoice has been approved for payment; the bank is then able to offer a 100 percent immediate
advance to the supplier at lower interest rates, knowing the invoice will ultimately be paid by the large company.
March 2015
25
5. Rebound of Venture Capital to SMEs
The dot-com bubble of late 1990s saw venture capital spending in the United States reach its
peak in 2000 with total spending of more than $105 billion across 8,000 deals.22 After the dotcom crash of 2000, the venture capital industry struggled to raise new funds, resulting in
decreased VC funding of $19 billion in 2003. VC funding increased at a compounded annual
growth rate of 13 percent until 2007, when the financial crisis and the ensuing economic
downturn stalled the growth. Since 2009, the overall venture capital funding in the United
States has remained below pre-crisis levels, in part due to the uncertain economic environment
and due to investor interest in emerging markets.23
However, in 2014, venture capital in the United States reached its highest level since 2000,
rising to $48 billion for 4,356 deals, according to the Money Tree report by Pricewaterhouse
Coopers and the National Venture Capital Association (NVCA). This is notably up from $30
billion for 4,193 deals in 2013.
Of the total, most investments dollars went to expansion stage deals, which received $20 billion
in 2014, twice as much as in 2013 (figure 21). The average deal size was $17.1 million. Early
stage deals received $15.8 billion and later-stage deals $12 billion, with deal sizes averaging
$7.3 million and $14.3 million, respectively (figure 22). Seed-stage investments that touched
$3.2 billion during the peak of the dot-com bubble have seen ups and downs over the past
decade. In 2014,192 seed stage deals received $719 million, the lowest since 2005. This reflects
the interest of venture capital funds in larger and more mature deals. Average seed stage deal
was $3.7 million, much larger than a typical angel investment raise.
March 2015
26
Figure 21 – U.S. Venture Funding by Stage of Development, 2000-14
Source: Money Tree report from PwC and NVCA.
Figure 22 – Average Deal Size in U.S. Venture Capital in 2000-14, by Stage
Expansion Stage
Later Stage
Total average
Early Stage
Seed Stage
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
March 2015
27
5.1
Venture Capital by Sector
Due to the less capital intensive nature of the business, the software industry has traditionally
captured the highest VC dollars among the high-tech industries. The software industry received
$19.8 billion going into 1,799 deals, up from $11.2 billion in 1,639 deals in 2013 (figure 23).
Venture capital investment other industries has traditionally been lower. Investments in the
media and entertainment industry have recovered robustly from 2009-10, reaching $5.7 billion
in 2014, up significantly from $3 billion in 2013 (figure 24). The biotechnology industry received
$6 billion in 2014, up from $4.6 billion in 2013. The IT service industry received $3.3 billion, also
up from $2 billion in 2013). These were followed by energy and industrials ($2.4 billion in 2014,
consumer products and services ($2.2 billion), and computers and peripherals ($1.5 billion).
While there are some concerns about a new Internet and tech bubble, evidence so far indicates
these concerns may be overblown.24 For example, the number of deals has remained quite flat
over the past several years, VC investments are overall at less than 50 percent of 2000 levels,
and companies also take longer to go public – unlike in 2000 when companies went public even
without any revenues.
Figure 23 – Venture Capital Funding in Software, 2000-14 ($ million)
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
March 2015
28
Figure 24 – Venture Capital Funding in 2000-14, Select Sectors ($ million)
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Biotechnology
IT Services
Industrial/Energy
Computers and Peripherals
Media and Entertainment
Medical Devices and Equipment
Consumer Products and Services
Financial Services
5.2
Regional Distribution of Venture Capital
VC dollars invested in the United States continue to be dominated by Silicon Valley. The
proportion of dollars being invested in Silicon Valley has increased from 32 percent in 2000 to
48 percent today (figure 25). The New York Metro region comes in second, with 10 percent of
dollars invested in 2014. New England comes close third, followed by LA region and Orange
County, and Midwest.
March 2015
29
Figure 25 – Venture Capital Investments by Region, 2000-14
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Silicon Valley
NY Metro
New England
LA/Orange County
Midwest
Southeast
Texas
Northwest
SouthWest
DC/Metroplex
San Diego
Colorado
North Central
Philadelphia Metro
South Central
Sacramento/N.Cal
Upstate NY
AK/HI/PR
Compared to other OECD countries, venture capital investments in the United States are quite
robust. In 2013, Israel and United States represented the highest VC spending as a percentage
of GDP (figure 26). Notably, the two countries differ in VC investments in early and late stage
companies. While early stage companies attracted 93 percent of total VC spending in Israel,
only 33 percent of VC investments in the United States went to early stage firms. Other
countries with notable VC activity include Canada, Ireland, Finland, Sweden, and Korea. VC
investments are low in such economies as Greece, Portugal and Spain that have been
embroiled in the European debt crisis.
March 2015
30
Figure 26 - Venture Capital Investments as % of GDP in 2013, by Economy
Source: OECD Entrepreneurship at a Glance 2014.
6. Angel Investing: Robust Market Presence Solidifying
As venture capital has moved to bigger deals over the years, angels have filled the gap for
startups. Angel market has also recovered steadily since 2008. In the first two quarters of 2014,
periods for which data are available through the Center for Venture Research at the University
of New Hampshire, the angel investment space showed signs that a sustainable growth. Angels
invested a total of $10.1 billion, an increase of 4.1 percent over the first half of 2013 and 15
percent decrease from 2007 (figure 27).
A total of 30,270 ventures received angel funding in the first half of 2014, a 5.8 percent increase
from the first half of 2013, and the number of active investors was 143,140 individuals, up by
6.1 percent from the first half of 2013 (figure 28). The increase in total dollars and the matching
increase in total investments resulted in an average deal size of $ 332,120.
Much like VCs, angels too have migrated somewhat away from seed and start-up stage
investing. In the first half of 2013, only 38 percent of angel investments went in the seed and
start-up stage companies. This is positive for companies starting out, but also significantly
below the pre-2008 peak of 55 percent. Overall, angels have moved toward expansion and
growth capital financings.
March 2015
31
Still a relatively limited number of ventures received angel backing. In the first half of 2014, the
share of deals that angels’ invested in of all deals brought to angels was 21.2 percent, about the
same level as in 2012 and 2013 (figure 29).
Software claims the largest share of angel investments, with 46 percent of total angel
investments in the first half of 2014, followed by retail (13 percent), healthcare
services/medical devices and equipment (12 percent), biotech (11 percent), industrial/energy (9
percent), and IT Services (9 percent) (figure 30). The consistently solid performance of the
industrial/energy sector is telling of angels’ growing interest in clean tech investing.
In the first half of 2014, women angels represented 21.5 percent of the angel market, and
women-owned ventures accounted for 15.9 percent of the entrepreneurs that sought angel
capital. 24.9 percent of these women entrepreneurs received angel investment in the first half
of 2014, above the overall market acceptance rate. Minority angels made up 6.6 percent of
angles and minority-owned firms 9.7 percent of the entrepreneurs seeking angel investment,
with an acceptance rate of 30 percent. Angel investments continue to contribute to job growth
with the creation of an estimated 96,860 new jobs in the United States in first half of 2014, or
3.2 jobs per angel investment.
Figure 27 – Angel Investments in 2002-2014, by Amount Invested and Average Deal Size
Source: Center for Venture Research at the University of New Hampshire.
March 2015
32
Figure 28 – Angel Investments in 2002-2014, by Number of Ventures Financed and Number of
Angels
Figure 29 – Angel Investments in 2002-2014, by Acceptance Rate (Deals Financed over Deals
Brought to Angels)
March 2015
33
Figure 30 – Angel Investments in Q1-2 of 2014, by Sector
7. Crowdfunding Is Coming to Equity Markets
Crowdfunding, which enables companies to raise donations, debt, or equity from individual and
institutional investors, gained steam in 2014. While comprehensive data on crowdfunding has
yet to be collected, according to recent estimates, the global crowdfunding industry has grown
explosively to nearly $10 billion in 2014, from about $1 billion in 2010 (figure 31). Some
estimates put crowdfunding investments at $500 billion in 2020.
Initially focused on creative, philanthropic, and social endeavors, crowdfunding has more
recently been applied to business and entrepreneurial ventures, and expanded from donation-,
and reward-based models to lending- and equity-based models. Numerous crowdfunding
platforms have emerged: in 2013, World Bank estimated that the United States alone has
nearly 350 platforms, followed by about 80 in the UK (figure 32). While some platforms target a
broad segment of startups, many others are focused on specific verticals, such as technology,
consumer brands, or in TradeUp’s case, exporters.
The equity-based model is assuming center stage in the United States after the passage of the
JOBS Act, which has approved general solicitation over the Internet. The two most
transformative pieces of the JOBS Act legislation are Titles II and III. Title II, which allows
companies raising capital to advertise and market their raise online, passed on September 23,
2013; Title III, which will allow non-accredited investors to make investments in exchange for
equity, is still pending, with decisions expected in late 2015. In March 2015, SEC announced
March 2015
34
what has been hailed as a transformative regulation A+ under Title IV, which enables growth
companies to raise up to $50 million from non-accredited investors in a mini-IPO style offering
serving as a potential alternative to venture capital or other institutional capital.
Figure 31 – Estimated Growth in Global Crowdfunding (in $ millions)
Source: Millennium Trust Company.
Figure 32 - Number of Crowdfunding Platforms in 2013, by Country
Source: World Bank
March 2015
35
8. Conclusion: What Lies Ahead for 2015?
Financing for SMEs appears to be recovering from the immediate post-recession years. The
space is increasingly colorful with alternatives for SMEs, from banks to online micro- and small
business lenders to supply chains finance programs, angel investors, and crowdfunding
platforms.
The summary highlights of this report are as follows:

Bank lending to SMEs has improved, but has yet to return to pre-crisis levels. In
December 2014, the latest date for which data is available, the loan balances for
commercial and industrial (C&I) loans of $1 million or less stood at $302.6 billion, $34
billion below the levels of June 2008 preceding the Great Recession.

Business owners appear more upbeat about their funding prospects than a year ago. In
the January 2015 Wells Fargo/Gallup quarterly survey of 600 small business owners,
34% of respondents stated that it was somewhat or very easy to obtain credit over the
past 12 months, up from 28 percent in January 2014.

Federal government sources have played a complementary and to an extent
countercyclical role during the past few years in SME lending. In FY 2014, the Small
Business Administration (SBA) supported $29.6 billion in lending to small businesses,
with its 7(a) loans topping the levels of the prior two years. The Export-Import Bank
supported export credit insurances and export working capital for SMEs at $5.1 billion in
2014, somewhat below authorizations in 2011-13. SBA-backed Small Business
Investment Company (SBIC) financings increased to $3.4 billion in 2013, the latest year
for which data are available and a five-year high.

Several online lending platforms have sprung up in the wake of the recession to offer
small businesses relatively quickly disbursing credit, typically for loans of less than
$250,000. According to estimates, online lending platforms loaned record $8.6 billion in
2014.25 One element of uncertainty in the sector is potential future government
regulation.

In terms of venture capital investments, 4,356 deals received $48.3 billion in 2014,
highest since the dot com boom of 2000, according to the MoneyTree™ Report by
PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association
(NVCA). Internet and software deals dominated. Expansion-stage deals received the
greatest amounts of investment, while early-stage deals dominated the number of
deals.
March 2015
36

Angel investment has become a strong complement to venture capital. In the first two
quarters of 2014 for which data are available, angels invested a total of $10.1 billion, an
increase of 4.1 percent over the first half of 2013.

Crowdfunding, which enables companies to raise donations, debt, and equity from
individual and institutional investors, gained steam in 2014. According to recent
estimates, the global crowdfunding industry has grown explosively to nearly $10 billion
in 2014 from $1 billion in 2010. Some estimates put crowdfunding at $500 billion in
2020.
As the U.S. economy recovers, 2015 can be a year of further recovery in bank lending to SMEs.
However, due to regulatory constraints, bank lending especially to small businesses will unlikely
rise above pre-crisis levels. Alternative sources, such as online lenders and equity
crowdfunding, are well-placed to secure wider acceptance in the market, contingent on
developments in the regulatory landscape. While there are concerns about a new tech bubble
that would undercut VC investments, evidence so far indicates these concerns may be
overblown.
March 2015
37
References
1
Nav Athwal. “Lending Club and Billion Dollar Valuations are Just the Beginning for Online Lending.” Forbes.
December 18, 2014. http://www.forbes.com/sites/navathwal/2014/12/18/lendingclub-ondeck-ipos-billion-dollarvaluations-are-just-the-beginning-for-the-online-lending-market/
2
Ayyagari, Meghana, Aslı Demirgüç-Kunt and Vojislav Maksimovic, 2006. “How Important Are Financing Constraints?
The Role of Finance in the Business Environment.” World Bank Policy Research Working Paper 3820. See also, Zia,
Bilal. 2007. “Export Incentives, Financial Constraints, and the (Mis)allocation of Credit: Micro-level Evidence from
Subsidized Export Loans.” Journal of Financial Economics, forthcoming; and Banerjee, Abhijit V. and Esther Duflo.
2004. “Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program.” CEPR
Discussion Paper 4681.
3
Joe Peek, “The Impact of Credit Availability on Small Business Exporters” (Washington: Small Business
Administration Office of Advocacy, 2013).
4
Beck, Thorsten, Aslı Demirgüç-Kunt, Luc Laeven and Vojislav Maksimovic. 2006. “The Determinants of Financing
Obstacles.” Journal of International Money and Finance, 25, 932-52.
5
Wells Fargo Q1 Survey: Small business optimism highest in seven years
https://wellsfargoworks.com/run/business-optimism-highest-in-seven-years
6
J.D. Harrison, “No, entrepreneurs, most of you don’t need angel investors or venture capitalists,” Washington
Post, 16 March 2015.
7
Ann Marie Wiersch and Scott Shane, “Why Small Business Lending Isn’t What It Used to Be,” Economic
Commentary /Cleveland Federal Reserve, 14 August 2013
http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm.
8
Bassett, William F. Seung Jung Lee, and Thomas W. Spiller. 2012. “Estimating Changes in Supervisory Standards
and Their Economic Effects,” Federal Reserve Board, Divisions of Research and Statistics and Monetary Affairs,
Finance and Economics Discussion Series, no. 2012-55.
9
Ann Marie Wiersch and Scott Shane, “Why Small Business Lending Isn’t What It Used to Be,” Economic
Commentary /Cleveland Federal Reserve, 14 August 2013
http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm.
10
Biz2Credit Small Business Lending IndexTM, January 2015 http://www.biz2credit.com/small-business-lendingindex/january-2015> In part because of being frustrated by long processing times at credit unions, small business
customers are gradually going back to bigger national and regional banks for their financing needs. In 2014, the
most prolific U.S. SME lenders include American Express, First Citizen Bancshares and Wintrust Financial (appendix
I). Larger players such as Citizens, TD Bank, Union Bank, and Wells Fargo are becoming increasingly active in small
business lending.
11
Wells Fargo and Gallup Small Business Survey Topline Quarter 4, 2014 <https://wellsfargoworks.com/q1-2015small-business-index-survey-results>.
12
“Greenwich Associates Reports on Small Business and Middle Market Banking: Positive Signs for 2015,” Business
Wire, 26 March 2015 < http://finance.yahoo.com/news/greenwich-associates-reports-small-business124300500.htm>.
March 2015
38
13
NFIB Small Business Economic Trends, December 2014
<http://www.nfib.com/Portals/0/PDF/sbet/sbet201412.pdf>.
14
See “Agency Financial Report FY 2014,” SBA, 2014.
15
Portfolio company net income is derived from SBIC data provided in SBA Form 1031, SBIC Financing Data. The
distribution only includes those portfolio companies in which SBICs reported net income data. SBICs are not
required to provide this information if this is a follow-on financing and data was previously submitted. Many SBICs
performing follow-on financings continued to provide this information. Approximately 12% of the financings were
associated to companies that did not report net income.
16
National Small Business Association and Small Business Exporters Association, “2013 Small Business Exporting
Survey,” <www.nsba.biz/wp-content/uploads/2013/06/Exporting-Survey-2013.pdf> (October 16, 2013).
17
18
See Mills, Karen, and Brayden McCarthy. 2014. “The State of Small Business Lending: Credit Access during the
Recovery and How Technology May Change the Game.” Harvard Business School Working Paper 15-004 (July) <
http://www.hbs.edu/faculty/Publication%20Files/15-004_09b1bf8b-eb2a-4e63-9c4e-0374f770856f.pdf>.
19
Michael J. De La Merced. “Lending Club is Set to Debut, and Industry is Watching.” New York Times. December
10, 2014. http://dealbook.nytimes.com/2014/12/10/lending-club-prices-i-p-o-at-15-a-share-surpassingexpectations/?_r=0
20
Ben Fischer. “OnDeck and Lending Club: How They Differ.” San Francisco Business Times. December 18, 2014.
http://www.bizjournals.com/sanfrancisco/blog/2014/12/ondeck-and-lending-club-how-theydiffer.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+bizj_sanfrancisco+(San+Franc
isco+Business+Times). See also, https://www.ondeck.com/business-loans/
21
Ibid. 3.
22
MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association
(NVCA), based on data provided by Thomson Reuters.
23
“Investor Confidence in U.S. Grows as Sentiment Declines in Emerging Markets,” Press Release on the 2013
Global Venture Capital Survey, Deloitte and National Venture Capital Association, 14 August 2013.
24
For a good analysis, see Bill Maris, “Tech Bubble? Maybe, Maybe Not,” TechCrunch, 24 March 2015 <
http://techcrunch.com/2015/03/24/tech-bubble-maybe-maybe-not/>.
25
March 2015
39

State of SME Finance in the United States in 2015

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