Online lending is making a significant difference in the growth of small businesses. According to a study by NDP Analytics, for every dollar small businesses borrow, they generate $3.79 in their local communities. This adds up to about $40 billion in economic growth nationwide, creating around 400,000 new jobs and generating $13 billion in wages.
Companies like Kabbage are at the forefront of this movement, having provided over $5 billion to more than 150,000 small businesses. Online lending streamlines the traditional borrowing process. For instance, with Kabbage, small businesses can link their live data to the platform and quickly qualify for credit lines up to $250,000, which adjust based on the business’s performance and seasonal trends.
Investing these funds wisely is crucial. Here are five key ways small businesses are using these funds to boost their revenue:
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Hiring More Talent: Many small businesses use these funds to expand their teams, which is often their biggest challenge. A bad hire can be costly, potentially eating up 30% of the business’s annual earnings. Secured lines of credit give them the flexibility to hire and retain top talent.
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Enhancing Marketing Strategies: In the digital age, a robust marketing strategy is essential. Funds are often put towards developing attractive websites and investing in SEO and social media promotion to enhance online presence. This is crucial for staying competitive and driving growth, especially in the early years.
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Business Expansion: Nearly 60% of small businesses seek funds to grow and seize new opportunities, like opening new locations or launching new products. This can be expensive, requiring new equipment, supplies, and additional staff. Access to capital allows businesses to manage these costs more effectively and expand sooner.
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Addressing Critical Needs: Whether it’s fixing broken equipment or managing payroll for new hires, businesses face urgent needs that require immediate funds. In 2017, 40% of businesses struggled with operating expenses, and many had to use personal funds. Extra capital helps cover these operational costs, keeping the business running smoothly.
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Seizing New Opportunities: Access to capital allows businesses to innovate and capitalize on timely opportunities. This might include testing new products, sponsoring events, or even experimenting with food trucks or pop-up events, as some of Kabbage’s restaurant clients have done.
Online lending not only supports small businesses in managing day-to-day operations but also empowers them to grow and stand out in the market. Unlike traditional banks, platforms like Kabbage consider various factors beyond credit scores to evaluate the health and potential of a business. This approach is filling the funding gap for small businesses, significantly benefiting the U.S. economy.
