Lenders publish ‘Small Business Borrowers Bill of Rights’
There has been a lending revolution in recent years, spurred on by online lending marketplaces that offer borrowers a quick and convenient experience. The model relies on rapid application processing and analytic technology to determine the creditworthiness of borrowers near-instantly, and when combined with low interest rates, this model has exploded in popularity. For example, Lending Club, an industry leader, recently announced that its loan originations has grown by 90 percent, and its revenue has doubled compared to the same time last year.
However, the model is not without its controversy. The increased competition has led to many traditional banks scaling back or entirely ceasing to offer small business loans, and many business owners who formerly relied on such access to credit will need guidance in adjusting to the new credit marketplaces. For the good of the economy and the future of small business lending, it is important that marketplace lenders guide potential borrowers according to best practices so they are not placed in loans they are unable to repay.
To address these concerns, a number of industry participants have co-published a "Small Business Borrowers Bill of Rights," which outlines six key rights to ensure responsible lending. The bill can be read on the companies' press release.
"Small business owners are seeing the number of alternative sources for financing their companies grow at an unprecedented rate, and while this is a good thing in terms of increasing access to capital, borrower protections have not caught up," Karen Mills, former head of the U.S. Small Business Administration, said in the release. "Seeing industry and other stakeholders take responsible steps like this toward ensuring the basic rights and safeguards is noteworthy and will help shape the dialogue going forward in a way that protects America's small businesses, without stifling innovation and access."
To best serve their clients and borrowers, small business loan brokers need to rely on the appropriate risk management solutions to protect both their organizations as well as the borrower. Using these tools can help differentiate a lender from competitors and offer borrowers a more secure and positive experience.
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