New Technology to Help Small Businesses Ignores the “Digital Divide”

April 23, 2012 at 4:34 pm

Brad Kime of On Deck Capital wrote a piece for CNBC today about small business’ barriers in accessing capital. He outlines the well-documented reasons for why small businesses face such difficulties in securing financing: problematic credit histories, over-reliance on credit scores by lenders, and the time and cost to lenders for underwriting small loans, among others. 

Kime is on point when he says that “businesses can only expand, hire and meet their potential when our lending system works efficiently.” Improvements in technology, he says, can break down these barriers. For lenders, programs like those developed by On Deck, help lenders aggregate information about potential borrowers from a range of sources to make a more comprehensive evaluation of businesses. For borrowers, new websites allow business owners to input their information and market themselves to several potential lenders at once.These tools will certainly help improve this system and increase flow of capital from lenders to businesses that need it.

However, for many of the very small businesses that have just a handful of employees, or are located in rural areas, these tools themselves will be out of reach. Some areas of the state don’t even have the infrastructure to support broadband, making web-based technologies nearly impossible. For others who do have access to the internet, many do not have the skills or know-how to navigate and utilize it.

Despite all the advances in technology, face-to-face interaction will still be vital to getting borrowers the information and assistance they need to access affordable capital. A functioning and efficient lending system has to take into account the needs of businesses in undeserved, rural communities that may not yet be able to use new technology. Lenders and technical assistance providers– the state’s Small Business Centers and Small Business Technology Development Centers, for example– can help businesses gain the skills they need to eventually take advantage of new technology. For now, though, those of us working to expand small business opportunities must meet the entrepreneurs where they are. 

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