Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Alumni
  • Login
  • Volunteer
  • Clubs
  • Reunions
  • Bulletin
  • Class Notes
  • Help
  • Give Now
  • Stories
  • Alumni Directory
  • Lifelong Learning
  • Careers
  • Programs & Events
  • Giving
  • …→
  • Harvard Business School→
  • Alumni→
  • Stories→

Stories

Stories

01 Dec 2019

INK: Big News for Small Business

Re: Karen Mills (Senior Fellow); By: Jen McFarland Flint
Topics: Finance-CapitalInformation-Books
ShareBar

The earliest small business loan on record dates back to Mesopotamia, when a royal baker borrowed capital—suggesting that small-business owners have been wrestling with access to capital literally since the dawn of civilization, says Senior Fellow Karen Mills. In her new book, the former head of the US Small Business Administration says we are on the brink of a radical transformation. Fintech players like Amazon and Square, powered by big data and AI, have the potential to bring about a golden age for small business, she says, simplifying the loan process for the borrower and lender alike.

What would this golden age look like?

Imagine if small businesses had access to AI-enabled insights—picture a dashboard informed by a business’s bank accounts, payment systems, taxes, and accounting software. The business owner could see their future cash needs, making it less likely that they would have a life-threatening cash crunch. But if it were to happen, they would have more options to borrow at affordable rates. Fintech is going to create more access for everyone, across the board, including women and minority-owned businesses that are often not well-served in today’s credit markets.

Photo by Susan Young

photo by Susan Young

I also believe this will decrease risk for lenders, which will lower the cost of capital and create a virtuous cycle. Community banks, in particular, could be big winners: Imagine if they introduced these fintech solutions into their core systems. Now instead of saying, “Can you bring me another set of old tax returns so I can put it in my credit model?,” they could say, “I have this whole understanding of your business and have preapproved you for a loan. But is $20,000 the right amount of money, or should you maybe take $40,000 and expand next door?” They could go back to relationship banking and maintain that role as the trusted local advisor.

What will it take to get us there?

Regulation is one of the greatest concerns as we move into this next stage of innovation, but the question is not more or less regulation. We need smart regulation. These algorithms introduce a whole set of new concerns. Who owns your data? If the algorithm has bad information about you, do you get to fix it? Does the regulator get to look at the algorithm? What if it leads to discrimination and creates disparate impact?

If we get it right, this revolution in financial services could spur a powerful transformation in access and opportunity. If we can foster an environment where innovation comes together with capital markets and lending and reduces the barriers and frictions in small business lending, we can help this critical part of our economy grow and prosper.

ShareBar

Post a Comment

Featured Faculty

Karen Mills
Senior Fellow

Related Stories

    • 18 Oct 2021
    • Yahoo! Finance

    Alumnae-founded Fintech Startup Secures $29M in New Financing

    Re: Lara Hodgson (MBA 1998)
    • 01 Sep 2020
    • HBS Alumni Bulletin

    We Rise

    Re: Hayley Barna (MBA 2010); Katia Beauchamp (MBA 2010); Kerry Rupp (MBA 1999); Sonja Perkins (MBA 1993); Aileen Lee (MBA 1997); Leslie Feinzaig (MBA 2007); Lisa Tatum (MBA 1998); Debby Farrington (MBA 1976); Madeline Darcy (MBA 2019); Rudina Seseri (MBA 2005); Jodi Gernon (MBA 1991); Paul A. Gompers (Eugene Holman Professor of Business Administration); Alison Wood Brooks (O'Brien Associate Professor of Business Administration); By: April White
    • 01 Dec 2019
    • HBS Alumni Bulletin

    Capitalizing the Corner Shop

    Re: Tunde Kehinde (MBA 2011); By: Dan Morrell
    • 01 Jun 2016
    • Wall Street Journal

    Imagine an Economy Without Wall Street

    Re: Nitin Nohria (Professor of Business Administration Harvard University Distinguished Service Professor)

More Related Stories

 
 
 
 
  • Explore
  • Explore
  • Explore
  • Explore
  • Explore
  • Explore
  • Explore
  • Explore
  • Explore
ǁ
Campus Map
External Relations
Harvard Business School
Teele Hall
Soldiers Field
Boston, MA 02163
Phone: 1.617.495.6890
Email: alumni+hbs.edu
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
  • Terms of Use
Copyright © President & Fellows of Harvard College