Why Did Small Business FinTech Lending Dry Up During the COVID-19 Crisis?

Authors: Itzhak Ben-David, Mark Johnson, René Stulz

We document how FinTech lending was affected by the first major crisis in its short history. Using detailed data about loan applications, offers, and take-up from a major small business FinTech credit platform, we find that while the number of loan applications increased sharply in early March 2020, the supply of credit collapsed as lenders dropped from the platform, so that the likelihood of applicants receiving loan offers fell precipitously. The funding model of FinTech lenders helps explain the drying up of the loan supply as lenders became financially constrained and lost their ability to fund new loans.