Fintech and Racial Barriers in Small Business Lending

Using a nationwide restaurant sample, we document that minority-owned businesses are more likely to apply to the Paycheck Protection Program through fintech than traditional lenders. We motivate our analysis by a two-sided matching model where this phenomenon can be generated through "technology preference" and "lending relationship" channels. Empirically, we first find that the racial gap in borrower ratings is smaller at fintechs, consistent with that minorities gain more utilities from fintechs. Second, we find that fintechs are more likely to lend to businesses with fewer previous lending relationships which are more likely to be minority-owned