Online Loan Broker Fundera Discloses Data on APRs

Small-business owners are often unable to find standard interest rate disclosures when they shop online for a loan, a situation that is raising hackles inside the industry.

In the latest related development, the online loan broker Fundera published data Monday about the interest rates paid by its customers, part of an effort to distinguish itself from others in the industry.

The move came a few weeks after another loan broker, MultiFunding, released data on the annual percentage rates charged to its customers, and publicly challenged Fundera and other competitors to follow suit.

Fundera said in a press release Monday that 1,300 small-business loans totaling $63 million were financed on its site between February 2014 and the third quarter of 2015. More than 20 lenders currently participate on the Fundera platform.

Short-term loans from firms such as CAN Capital and OnDeck Capital made up 36% of Fundera's loan volume, according to the data. Those loans had average APRs of 30%-50%, though a quarter of the loans were below that range and a quarter of them were above it.

Medium-term loans from Funding Circle and Lending Club, among others, constituted 34% of Fundera's loan volume, and those loans had average APRs of 15%-25%, the company stated.

Loans backed by the Small Business Administration made up 13% of the loans originated on Fundera's platform. SBA loans had the lowest APRs, averaging 10%-15%, according to the data.

"The purpose of this report is to help business owners make the best financing decisions by offering a resource for true apples-to-apples product and cost comparisons," Jared Hecht, Fundera's chief executive officer, said in the press release.

As online lending to small business has blossomed in recent years, critics argue there has been a race to the bottom that has hurt small-business owners. The absence of uniform interest rate disclosures can make it difficult for borrowers to comparison-shop, while loan brokers have financial incentives to steer business owners into higher-cost credit.

In response, some in the online lending industry joined together in August as part of a self-regulatory initiative dubbed the Small Business Borrowers Bill of Rights. Fundera, MultiFunding, Lending Club and Funding Circle have all embraced that document, which requires signatories to disclose an annualized interest rate to borrowers.

But many other industry participants, including higher-cost lenders such as CAN Capital and OnDeck, have not signed on.

The dearth of borrower protections for small-business owners has also begun to draw scrutiny in Washington. Democratic Sens. Sherrod Brown, Jeff Merkley and Jeanne Shaheen, Democratic Rep. Nydia Velazquez, and officials in the Treasury Department have all called attention to the issue in recent weeks.