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Innovative Lending Platform Association Unveils SMART Box

OnDeck, Kabbage and CAN Capital, members of the Innovative Lending Platform Association have unveiled their disclosure box for small business borrowers.

October 25, 2016 By Ryan Lichtenwald Leave a Comment

Views: 27

innovative_lending_platform_association_smart_box

Yesterday, the Innovative Lending Platform Association (ILPA), made up of small business online lending leaders OnDeck, Kabbage and CAN Capital, announced SMART box, an initiative to provide transparency to small business borrowers. We caught up the Kathryn Petralia, Co-Founder & Head of Operations at Kabbage to learn more about the SMART Box

The ILPA along with the Association for Enterprise Opportunity (AEO) engaged small business stakeholders, owners and advocates along with other lending platforms, policymakers and not-for-profit organizations to create the new SMART Box. Kathryn shared that their conversations also included OCC and Treasury officials.

SMART stands for Straightforward Metrics Around Rate and Total cost. It provides consistent verbiage and standardization of pricing across loan products including total cost of capital and annualized percentage rate. The ILPA have broken out three versions of the new disclosure box for different loan products: term loans, lines of credit and merchant cash advances. Each disclosure highlights the differences of each product while communicating standard pricing and consistent verbiage to the borrower. There will also be third party validation done by Navigant Consulting, who will validate APR calculation methodologies to ensure they are consistent with principles of Regulation Z (The Truth in Lending Act).

An in-depth look at each disclosure box is available on the ILPA website. Kathryn noted that each disclosure is a living document and there will be subsequent versions to improve them.

There are two parts to the SMART box. According to ILPA website:

The first part presents basic elements of the finance option under consideration, including the amount financed, the funds disbursed, the total repayment amount, the expected term, and the frequency of payback (as applicable).

The second part of the SMART Box presents four common pricing metrics: total cost of capital, APR (estimated for merchant cash advances), the average monthly payback, and the cents on the dollar cost of the financing option.

The SMART Box also breaks out the prepayment policy, if applicable on the loan. If there are prepayment fees that are are not captured in the SMART Box there will be a reference to the loan documents where any additional fees are outlined. There is also a breakout if prepayments will result in any reduction in interest or applicable loan fees.

SMART box will be rolling out in early November. Here is what Kathryn had to say when we asked her to summarize what the SMART box means.

The SMART Box is all about transparency. We want to enable the small business borrower to have a complete look at all the details of their financing. It is also a sign of maturity in the online small business lending industry.

Conclusion

Providing disclosures like the SMART Box is simply the right way for online lenders to do business. Disclosing full transparency around the cost of credit in the small business space, especially with a merchant cash advance products, is something that hasn’t been done adequately before. The ILPA isn’t the first organization to have announced such an initiative as Fundera announced their disclosure box last month. Hopefully we will see the trend towards transparency continue. While this will please regulators, more importantly, it will provide small business borrowers with all the information necessary to make an informed decision about their credit needs.

Filed Under: Peer to Peer Lending Tagged With: Can Capital, Innovative Lending Platform Association, Kabbage, OnDeck, SMART box

Views: 27

Online Small Business Lenders Form Industry Association

OnDeck, Kabbage and CAN Capital have teamed up to create the Innovative Lending Platform Association

May 6, 2016 By Ryan Lichtenwald 2 Comments

Views: 13

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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. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: association, Innovative Lending Platform Association, marketplace lending, small business lending

Views: 13

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ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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