The US Department of Treasury has announced its intent to release a white paper next week pertaining to their review of the marketplace lending industry (orginally labeled peer to peer lending). The document is expected to encapsulate the many comment letters submitted to Treasury following their initial “Request for Information” (RFI) in July of 2015. Treasury followed up the request with a gathering of over 80 industry participants in August of 2015 that included an “impromptu” visit by Secretary of the Treasury Jack Lew who gave a brief “supportive” speech.
Access to Capital
Access to capital is a major challenge for small business owners. Without adequate funding or access to reasonable loans, small businesses can’t grow and thrive – or even get off the ground in many cases. To help ensure entrepreneurs secure the funding they need to be successful, Small Business Majority has partnered with the VEDC in Los Angeles County to launch a new program providing access to capital education to small business owners.
Since the financial crisis, regulators and policymakers have concentrated on making brick and mortar banks safe and secure. But, away from regulatory scrutiny, a new sector has emerged led by non-bank online lenders and, if we aren’t careful, it has the potential to harm millions of small business borrowers. Self-policing is a step in the right direction, but increased regulatory vigilance is both warranted and desired.
On August 6 in Washington, a responsible business lending coalition of for-profit online and mission-based lenders, brokers, think tanks and small business advocates announced an agreement on rights that every small business borrower deserves when seeking a loan online, defined as a Small Business Borrowers’ Bill of Rights. This marks a turning point in the small business lending industry. For the first time, online lenders are agreeing to self-regulate and offer fair and transparent terms to small businesses. Any lender or broker will be permitted to sign onto the agreement, by signing a letter from their CEO attesting that they abide by the principles enshrined in the agreement.
When Dawn Brolin, owner of Windham, Connecticut-based Powerful Accounting, needed capital to fund her firm’s growth, she decided to skip the bank and try an online lender. Although she was qualified for a traditional bank loan, she wanted to test the waters of alternative lending and share the experience with her small-business clients.
“I know not every small business can walk into the bank and get a loan,” Brolin tells NerdWallet. “Maybe alternative lending sounds scary, but it’s not.”
As a small-business owner, you generally have two basic ways to raise startup business funding: You can offer investors equity ownership in your company or take on debt in the form of a loan. Both funding sources can provide your business with the cash it needs, and each comes with benefits and drawbacks to consider. Here’s an overview of equity and debt funding, their pros and cons, which businesses may be better suited to each and how to obtain funding.
By all accounts, our economy is continuing on a path of recovery in the aftermath of the recession. And while this should signal good times ahead for our nation’s small businesses, entrepreneurs are still struggling to get what they need most to grow and thrive: access to traditional loans and more reasonable terms on alternative lending. That’s why we addressed this problem head-on during our access to capital panel on May 12 at our Small Business Leadership Summit–an event that’s brought more than 100 small business owners from around the country to D.C. to speak directly to policymakers, issue experts and members of the Administration about the top issues facing small businesses, including the shortage of lending for entrepreneurs.
No one likes rejection. Whether it’s a “no” from your dream job, the person you love or the bank, it stings. And if you’re a small business owner, you might know the feeling all too well. Of small businesses that applied for financing in the first half of 2014, only half received any amount, according to a survey by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia. NerdWallet asked lending experts the burning question so many small business owners want answered: Why are small business owners turned down for small business loans?