In April 2016, the Small Business Finance Association released a set of best practices for the alternative finance industry. To best serve small businesses, the new guidelines provide essential steps for industry members in four key areas.
Stephen Denis, SBFA Executive Director, was formerly Deputy Staff Director of the House Committee on Small Business. During his tenure with government, Denis witnessed how the collapse of traditional lending sources can impact small businesses. "We were here every day with small business constituents from around the country, and the number one issue that was always brought up to us was the lack of capital out there for small businesses," Denis said. "It's really tough for a small business to go and get a smaller dollar loan."
He noted that traditional bank loans are down approximately 20 percent since 2008, and that because many traditional lenders have abandoned small business loans, alternative finance providers have emerged to fill the gap.
To encourage small businesses to obtain financing from reputable companies, the SBFA best practices are posted online in a document titled Small Business Finance Principles. Following is a summary of the four guiding principles.
As an advocate for small business access to finance products, Denis recently testified at the state level pertaining to a bill that would have introduced additional compliance requirements.
"It was a pretty complex bill, 14 or 15 pages of regulations for the industry, creating licensing and various legal components the industry would have to comply with and make it really difficult for our companies to operate in the state of Illinois," Denis said. "We think there are some things in the bill that were positive."
Reaching out to policymakers to ensure over-regulation doesn't erode the alternative finance market will be an ongoing challenge for the SBFA. Denis stated that some policymakers want to regulate small business loans similarly to consumer loans, which are structured differently, so more education will be needed.
"SBFA understands that small businesses take big risks to succeed," said David Goldin, SBFA President and Chief Executive Officer of Capify. "We want to be a resource in their success by providing transparent capital solutions that they can trust. "
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