Crowdlending, Self-Employment, and Entrepreneurial Performance

Abstract

Access to finance is crucial for sustaining entrepreneurial activity. Elaborating on resource dependence theory, we argue that the adverse impact of a loan rejection by a crowdlending platform is more severe than that of a rejection by a traditional financial institution. The data indicate that a failed crowdlending loan attempt is associated with a 14.80% increase in the probability of transitioning out of self-employment. This effect is 1.62 times that of revolving lines of credit and 3.08 times that of non-revolving lines of credit. We highlight that these effects are amplified for marginal borrowers and credit- and income-constrained entrepreneurs. In addition, we show that successful crowdlending enhances self-employed individuals’ future income and future access to traditional lines of credit. Implications for policy and practice are discussed.