While some small businesses continue struggling with access credit, opportunities are expanding in large part because of technological innovations in online banking.

Former Small Business Administration headKaren Mills, now a senior fellow at Harvard Business School, says technology is changing the small businesses lending market. According to Mills' recently published Harvard Business School Paper entitledThe State of Small Business Lending: Credit Access During the Recovery and How Technology May Change the Game, small businesses are core to America's economic competitiveness. However, in recent years, small companies have been relatively slow to recover from the recession and credit crisis that hit them especially hard.

Mills knows what she is talking about. She guided the SBA, which played a vital role in helping to maintain the flow of capital during the darkest days of the 2009-11 credit crunch, when big banks tightened the spigot and made it difficult for entrepreneurs to secure funding. The agency did so by guaranteeing loans (up to 90 percent) made by approved SBA lenders and waiving fees associated with the loans. Mills was so effective at the federal agency that President Obama elevated the SBA Administrator to a Cabinet-level position.

Mills' report finds a silver lining, though, and provides a hopeful view for small businesses, by pointing to the emerging, dynamic market of online lenders using technology to fill the small business credit gap in underserved markets. While online banking may disrupt traditional ways of lending to small businesses, technological advances have increased opportunities for entrepreneurs in search of funding.

"The potential of these market disruptors to fill the gaps in small business is high," Mills noted, "and if they are successful, small businesses will have more opportunity to do what they do best--grow the American economy and create jobs."

I could not agree more. Online submission of small business loan application reduces time-consuming paperwork and increases the efficiency of bankers' decision-making processes. It is not coincidental that bank approvals of funding requests have grown steadily throughout the past twelve months. The incorporation of technology has made banks and credit unions more efficient and also has introduced less creditworthy borrowers to lenders more willing to accept risks (ex: so-called "alternative lenders" who will lend at premium rates to justify the added risk they are taking).

All players--banks, credit unions, alternative lenders, microlenders and even institutional players are hopping aboard the technology bandwagon. Those who continue to do things the old fashioned way--insisting on having small business owners visit branches and fill out paperwork with no real guarantee of funding success--will not be able to compete with institutions that have automated the process.