Online lenders doled out loans worth more than $5 billion to several small businesses in 2014, a report from the Federal Reserve highlights. Yet, this fragment of the lending industry is often overlooked by regulators when it comes to policy making. Thus, in a bid to gain prominence among Fed regulators and Congress, online and alternative lenders have come together to form the ‘Coalition For Responsible Business Finance’.
Group of alternative lenders
This coalition will include several non-traditional lenders as well as finance companies, who use their own credit evaluation techniques to extend funds to those small businesses, which fail to secure a loan from traditional lenders.
Such a union is aimed to make policy makers aware of the role played by them to fund small businesses. Moreover, these alternative lenders want the regulators to frame industry best practices to prevent unwarranted lending practices.
The coalition advisory board is being represented by three bodies, namely, the National Small Business Association (NSBA), the National Federation of Independent Business (NFIB) and the Small Business & Entrepreneurship Council. It will be run by Tom Sullivan, who was formerly associated with the Small Business Administration Office of Advocacy.
Among others, Breakout Capital of McLean, Va., is one of the participating non-traditional lenders in this coalition. The presence of this company is significant as its founder Carl Fairbank was a former investment banker who started the company to lend support to small businesses transparently.
Meanwhile, Sullivan commented that the coalition wants regulators to keep a soft touch approach towards this new and flourishing lending industry. Sullivan stressed the greater need for regulators to strike a balance between traditional and non-traditional lending. He cited the difficulty faced by banks to make loans below $100,000 to $150,000 following the Dodd-Frank Act.