About the Small Business Finance Industry
The Small Business Finance Association (SBFA) is a group of technology-driven financial service companies specifically focused on providing efficient and responsible capital to small and medium businesses – independent businesses – across America. We utilize the latest in financial technology to provide our small business customers with time-efficient, cost-effective means to obtain capital. Our members’ innovation has brought billions in new capital to the small business lending sector – funding which is vitally important given the tightening of credit markets since the 2008 financial crisis and now as we recover from the COVID-19 pandemic.
We Offer Efficient Lending Platforms: Our members have developed efficient lending platforms and underwriting models that allow them to provide financing to small businesses in a matter of hours or even minutes. The backbone of our industry is efficiency. Our companies are designed to help businesses in need quickly and responsibly.
We Provide Capital to Truly Small Businesses: While every business is important, we are focused on truly small businesses. The federal definition of “small” is any business with fewer than 500 employees. Our industry provides working capital to businesses with an average of 10 employees. In most cases, the businesses we fund are seeking under $100,000, with an average loan around $50,000. Our customers are the companies you interact with every day in your community—the type of businesses that anchor our daily lives. Most of these businesses don’t have access to traditional finance.
We are Experienced Small Business Finance Providers: Our greatest resource is the experience our own employees can provide to help merchants. We work directly with small businesses daily and are experts in helping secure responsible financing to ensure they are positioned to grow. While technology is a big part of our industry we still believe in human interaction and providing direct access to customer service representatives. Our company are built on people with a passion for being a part of a businesses success.
Our Policy Positions
Every SBFA member company is expected to comply with our Code of Conduct (link). We work with policymakers at the federal, state and local level on legislation we believe is in the best interest of our small business customers.
Meaningful Disclosure: We support efforts across the country to enact meaningful disclosure laws. We believe small businesses are entitled to disclosures that are simple, clear and provide valuable information to allow customers to compare the price and terms of different products across the alternative lending industry. We believe some disclosure initiatives are designed to be intentionally confusing to the borrower. Some companies over-disclose terms, metrics and numbers in an effort to complicate the customer. We believe metrics like “APR” or “cents on the dollar” are intended to be misleading. Most business owners don’t understand what an APR is or why it has never been applied to commercial finance products. Even the CFPB has concluded that APR is confusing to consumer and has removed or deemphasized the metric in some disclosures. We prefer a simple disclosure that would use easy to understand terminology and metrics that everyone can calculate.
Licensing: We believe state regulators should be able to license all companies who provide or market financing products to small businesses. It’s important for regulators to know who is doing business in their state and what type of products are being offered. Equally important is the ability for small business to have a place to issue complaints about bad actors. Basic licensing will go a long way to eliminating bad companies and practices from the industry.
Confessions of Judgment: We strongly support legislative efforts to eliminate predatory collections practices. Unfortunately, some alternative lending companies were misusing a legal process that was intended for good-acting companies to protect large financing transactions. The misuse of the COJ has unfortunately been used by some companies in a predatory way to take advantage of some small businesses across the country. We have supported efforts in New York and New Jersey to eliminate the practice and will continue to work towards a federal ban.
COVID-19 Response: The SBFA is encouraged by the steps Congress and the administration have taken to provide liquidity to American small businesses. The Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) loans funded under the CARES Act are intended to provide immediate relief to small businesses and their employees impacted by COVID-19. We firmly support current proposals to immediately provide more funding to both the EIDL and PPP loan programs. However, we have proposed that more of this funding should be set aside for smaller businesses that do not have access to traditional finance.