Small Businesses Turn To Online Lenders

The tech sector has reached into a new industry over the past year as more and more firms rush to

. Despite the US' recovery since the financial crisis, banks have been cautious about doling out small business loans. In 2008 banks held $711 in small business loans, that figure has decreased significantly to just $599 billion as of the second quarter of 2015. For that reason there has been a gap in the marketplace as entrepreneurs look for ways to fund their growing companies.

While small business owners might be required to make a pitch to a bank or private investor in order to secure funding, some companies are using their existing relationships with entrepreneurs in order to make loans.

together with

have

that allows users of the firm's QuickBooks to secure small loans. The firm is able to use existing data from the user to determine how risky the loan would be, making it easier to deliver lower-rate loans for businesses with strong financials.

Other firms have created similar programs that use data gathered from customers in order to determine whether or not a loan is worthwhile. Online lender Kabbage Inc. has partnered with

to make loans using the firm's shipping history as a gauge of how many orders they're fulfilling.

similarly uses a vender's transaction history to determine whether or not a loan would be high-risk.

However, such loans can be difficult for small business owners to repay. As online lenders become plentiful, many are jockeying for clients by offering more money at higher rates. The ease of borrowing money online has also given rise to a slew of

that are able to approve huge sums of money quickly, but charge annual percentage rates of more than 100 percent.