WASHINGTON, DC, Jan. 15, 2025 (GLOBE NEWSWIRE) — The Minority Business Development Agency (MBDA) released the FinTech and Alternative Financing for Minority Business Enterprises report; a joint project between MBDA and the Third Way Institute. The report analyzes one of rapidly growing alternative forms of finance and its popularity among minority business enterprises (MBEs).
FinTech (Financial Technology) firms, companies that specialize in offering digital financial services to consumers or enable other financial service providers to offer digital financial services to consumers, are one of the fastest-growing components of alternative finance. From 2013 to 2018, lending jumped from $121 million to $2 billion in quarterly originations to small businesses.
Despite their demand, FinTechs are subject to less regulation than traditional lenders or established financial institutions due to their newer status and ongoing development as a financial sector.
According to the 2022 Small Business Credit Survey by the Federal Reserve Banks, one-in-three Black-owned employer firms applied to FinTechs for credit, along with 29% of Hispanic- and 20% of Asian-owned businesses. Online lending is also more common among non-employer firms of all backgrounds, with 32% seeking financing at online lenders compared to 22% of all employer firms.
“FinTech offers new gateways to non-traditional capital sources that can benefit MBEs, who face barriers accessing traditional finance,” said Eric Morrissette, performing the non-exclusive duties of the Under Secretary of Commerce for Minority Business Development. This new report provides an essential background on these opportunities, but also of the risks of tapping less-regulated financial markets.”
The report finds that entrepreneurs and small business owners are turning to alternative finance solutions due to issues securing capital from traditional financial institutions. Some of these challenges include long application times, delays in receiving capital, lower acceptance rates, and less favorable credit determination speeds.
This report studies the FinTech landscape in the United States to give entrepreneurs, business owners, and policymakers a deeper understanding of this sector, how it works, and both the opportunities and risks of FinTechs as an alternative financing solution.
Details of its findings, and other reports by the Minority Business Development Agency can be reviewed at www.mbda.gov/research.
About the Minority Business Development Agency (MBDA):
The U.S. Department of Commerce, Minority Business Development Agency is the only Federal agency dedicated to the growth and global competitiveness of U.S. minority business enterprises (MBEs). For more than 50 years, MBDA’s programs and services have better equipped MBEs to create jobs, build scale and capacity, increase revenues, and expand regionally, nationally, and internationally.
###
Wall St Business News, Latest and Up-to-date Business Stories from Newsmakers of Tomorrow