As online business lenders grow in number, size and prominence, a new trade group is being launched to represent their interests in Washington.
The Coalition for Responsible Business Finance announced its official launch Tuesday.
Five companies are funding the group initially. Those firms include three online lenders: Breakout Capital, Fundation and the Business Backer, which is owned by Enova International. The other two funders are Paynet, which is a data provider, and Orion First, a loan servicing firm.
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A new survey from seven regional Federal Reserve banks found that many small businesses are going online to access credit. But even when they are approved, applicants often end up dissatisfied because the loans carry high interest rates or have unfavorable repayment terms.
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Antonio Weiss, a counselor to Treasury Secretary Jack Lew, called Thursday for greater transparency in the pricing of online small-business loans.
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Lending Club and Funding Circle are among the firms pledging to adhere to a range of self-imposed standards in small-business lending.
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Tom Sullivan, the group’s executive director, has been working behind the scenes for about six months prior to the group’s formal launch. Late last year several groups that represent U.S. small businesses agreed to serve on a board that will advise the Coalition for Responsible Business Finance.
Representatives from the National Federation of Independent Business, the National Small Business Association and the Small Business & Entrepreneurship Council are all members of the group’s advisory board.
“If you have industry saying that they want to help small business, then small business has to be part of it,” Sullivan said.
Sullivan formerly served at the U.S. Small Business Administration, and he currently works as an attorney at Nelson Mullins Riley & Scarborough in Washington.
He said the group plans to educate policymakers about online business lenders, and wants to dispel what he describes as misconceptions. For example, the idea that the interests of banks and nonbank lenders are at odds is a myth, Sullivan said.
The online business lending industry has been riven by charges that some lenders engage in unscrupulous behavior, and there has so far been little response from federal and state governments.
In that context, the new group is working to map out a set of so-called best practices for online business lenders. A related effort – known as the Small Business Borrowers Bill of Rights – was announced last year by a different set of industry participants.
Sullivan said that his group is talking with the authors of the Small Business Borrowers Bill of Rights.
