CLEVELAND (8/28/15)--Small businesses report difficulty in comparing online credit products to traditional ones and are concerned about privacy and data security, according to a study conducted by the Cleveland Federal Reserve Bank and the Federal Reseve Board. The study's authors recruited 44 small business owners (with two to 20 employees and less than $2 million in annual revenues) to gauge their thoughts on using online lenders.
The online lending industry has grown rapidly, and recent surveys indicate that small businesses are increasingly turning to these sources. Online lenders generally offer small-dollar credit products such as cash advances, lines of credit and other types of loans.
According to the Cleveland Fed survey, while focus group participants demonstrated an openness to online lenders, they have a number of concerns:
The U.S. Treasury recently announced a request for comments on online lenders that serve both consumers and small businesses. Comments are due to the Treasury by Sept. 30.