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We recently cited asurveyfrom Richards Kibbe & Orbe LLP showing 85% of institutional investors were looking to put some money into alternative loans or the platforms themselves. The survey also shows that among these investors, small business loans are the most desirable:
- 31% of respondents were interested in investing in small business loans.
- The other three loan categories — consumer, real estate, and education — each captured the interest of about one-quarter of investors.
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The results show that ultimately, investors are seeking opportunities in lending platforms across the board, but small businesses might lead the pack because there’s high borrower-side demand in this area — small businesses are often highly likely to be rejected from receiving a loan at a traditional bank. This is because it is less profitable for banks to lend money to them — it is just as costly to underwrite a small business loan compared to a larger loan with higher returns.
Marketplace lenders use a different underwriting model that makes it easier and quicker for businesses to gain access to financing, and therefore, these businesses are beginning to flock to these platforms.
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