Online Small Business Lenders Form Industry Association

innovative-lending-platform-association-2016

The last 12 months has seen a lot of movement on the industry association front. Last year the Small Business Borrowers’ Bill of Rights, while not an association per se, was the first initiative to bring more transparency to small business lending and more recently the Marketplace Lending Association was formed. Yesterday, we learned of a new association that is being born, this time from the leading short term small business lenders OnDeck, Kabbage and CAN Capital in partnership with the Association for Enterprise Opportunity (AEO). Yesterday, we spoke with Noah Breslow, OnDeck’s CEO to learn more about the new association and why they chose to create their own.

The new association is called the Innovative Lending Platform Association (ILPA) and is focused on all business lending, not just short term lenders. Noah stated that there was a need for an industry association to be inclusive of short term lenders and none of the current groups reflected their perspective. He added that they are open to bringing on board other types of credit providers to small businesses such as those providing merchant cash advances.

The association aims to provide transparency using dual disclosure which discloses both total cost and APR to the borrower. Providing the total cost to the borrower can help business owners understand what they will end up paying much easier and in turn will allow them to make an informed financing decision.

The new association set up a period of 90 days for others to join them as well as provide input. The new standards will officially roll out in September, which centers around a new SMART box model. Noah told us that aspects of the new SMART initiative, which stands for Straightforward Metrics Around Rate and Total cost are available in loan documents, but they needed to do more. According to the press release:

The SMART Box will present a small business with a chart of standardized pricing comparison tools and explanations, including various total dollar cost and annual percentage rate metrics that enable a comprehensive pricing comparison of loans of equivalent duration.

With this initiative they will also establish a uniform way of calculating APR across all industry participants. This will result in a level playing field so borrowers can accurately distinguish between each offering. The SMART Box will be similar to the truth in lending disclosure that you receive when taking out a consumer loan such as a mortgage.

When we asked how the new association will work with Washington, Noah said that there will be some public policy work but the new association is more centered around educating and informing the public as opposed to being a lobbying group. We can expect to see more studies which report on the economic impact of these lenders like the one released recently. From the press release Noah stated:

OnDeck is one hundred percent focused on responsibly serving small businesses and we are proud to join other industry leaders in this groundbreaking initiative to establish transparency best-practices that benefit the marketplace. In the days ahead, we look forward to working with other lenders, trade associations, policymakers, and non-profit organizations to create a national model for small business lending disclosure.

Conclusion

Industry associations are something that have received a lot of attention over the last year. It’s great to see these companies coming together to establish themselves as a credible way for borrowers to access credit while providing more transparency to borrowers. As various regulators get more involved it is important that industry associations like the Innovative Lending Platform Association exist to ensure their voice is heard.

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Fred de Roode
May. 19, 2016 10:51 pm

My company would be interested in joining your group. We have been in business since 1998. We are a commercial loan originator, operating nationwide and specialize in business acquisition loans for professional licensed businesses. We are the largest lender in the U.S. to several niche industries such as Allstate agents, RIA’s, Ameriprise, Farmer’s agents, Fed Ex routes just to name a few. Our portfolio has a 30 bps cummulative loss history since 1998. All of our loans are sold to banks. We are privately owned and have no debt. We are looking for a peer to peer lending platform to enable us to sell our loans to mom and pops/ Main Street people and qualified, sophisticated investors/ P/E firms and others where commercial loans between $500,000 to $20 million would be appropriate. Our loans are secured, professionally underwritten and we know what we are doing. We do not need grocery money. We are looking for technology partners to enable us to deliver our loans to investors other than banks. We are looking to diversify away from banks since this is our background……commercial bank lending and credit analysis. Please contact me if interested. Fred de Roode, co-founder, director and shareholder and retired Chairman and CEO, PPC LOAN, INC. The Woodlands, TX , Fred@ppcloan.com or 281-731-2133

Peter Renton
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Peter Renton(@peter)
May. 20, 2016 3:33 pm
Reply to  Fred de Roode

Fred,

If you would like to engage with this new association you should reach out to them directly here:
https://innovativelending.org/