Fundera’s Small Business Borrowers’ Bill of Rights
Last week, we penned an op-ed in Forbes urging the online lending industry to come together in prioritizing the promises we make to borrowers.
We passionately believe that online lending has the potential to transform how small businesses apply for and receive credit. But, we know that achieving that transformation is contingent upon fostering greater transparency and accountability to borrowers. For a loan market to fully serve the interests of borrowers, they need to be able to understand the costs, benefits, and risks of loan options, and to be able to clearly compare those options.
We’re urging the industry to put a new focus on borrowers’ rights. Why? We have already done so here at Fundera, and seen the true difference it makes throughout the entire small business loan process. These are the promises we make to our borrowers, and the promises we hope the entire industry will start making too:
1. Borrowers’ right to terms that are disclosed in plain sight. We feel strongly that business owners know what’s best for their business, but the current loan market doesn’t make it easy for them to decipher loan products or processes. We know that our borrowers look to us to help them make sense of their loan options, and we take the trust and confidence that our borrowers place in us very seriously. We do everything we can to express the terms of loans on our platform in plain sight and explain them in plain English before they agree to the terms of a loan. For example, we spend time walking our borrowers through every step of the loan process, explaining to them the difference of each loan product, from a merchant cash advance to a term loan.
2. Borrowers’ right to a true calculation of price. We do everything we can to make sure that our borrowers understand the cost of their loan. We break down every fee that a borrower will incur as a result of the loan, and make sure they understand how their loans will be repaid and what the full breakdown of the total cost of the loan looks like. We represent every product we offer with a dedicated business loan calculator so we can walk borrowers through the costs of their loan and ultimately see those costs represented in Annual Percentage Rate (APR). The APR is especially important to us because it allows our borrowers to make comparisons on price across any product on our platform or anywhere else in the market.
3. Borrowers’ right to understand the consequences of financing decisions. We know that small business owners are stretched thin and are often just as unfamiliar with the complexities of 3-inch thick loan documents as everyday consumers. That’s why our customer success representatives try to educate borrowers about potential pitfalls of every loan product on our platform. We walk them through the pros and cons of each product, and explain potential downsides for their business. We have also launched a “Know Before You Owe” campaign, which provides borrowers with everything they need to know before they apply for a loan, and what they need to be successful (no matter where they go to get capital).
4. Borrowers’ right to control their own information. We appreciate the trust that our borrowers place in us when disclosing their personal information, and we take the protection of that information very seriously. Above all else, we try to be transparent about where our borrowers’ information is going and how it’s being used. We realize that radical transparency may not be what borrowers are used to when dealing with finance companies, but for us it’s everything. That’s why we will never sell our borrowers’ information to anyone else—ever. That means they’ll never receive unsolicited telemarketing calls or pesky spam emails when they work with us. We only share their information with our lending partners with their explicit consent.
5. Borrowers’ right to fair, equitable, and nondiscriminatory access to credit. We firmly believe that every borrower deserves to be treated fairly and equally when seeking credit access, and that credit decisions should never be based on personal characteristics, such as race and gender, that are entirely unrelated to creditworthiness. To that end, we reaffirm our commitment to uphold fair lending laws, including the Equal Credit Opportunity Act (ECOA), which prohibits discrimination against individuals seeking credit on the basis of race, color, religion, national origin, sex, marital status, age, acceptance of income from any public assistance program, or exercise of rights under the Consumer Credit Protection Act. And, we’ll go one step further. ECOA does not currently protect lesbian, gay, bisexual or transgender (LGBT) individuals from discrimination when seeking credit access, but in the interests of fairness and equality, we promise to extend that same protection to LGBT small business borrowers who access our platform. Ultimately, equality of opportunity is one of the most fundamental promises of America, and one of our most important commitments to our borrowers.
These rights are fundamental in changing how small business owners apply for and get credit in America. Doesn’t it make sense for the entire online lending industry to make them a priority? Putting these principles at the center of our industry will help us create shared value for all stakeholders as we continue to scale, and ultimately advance a fairer small business lending market.
We’d also like to note, considering Fundera is a marketplace and not a direct lender, our commitment to our borrowers doesn’t stop with the above. As we continue to scale our own platform, we will work diligently to make sure that our role as guides in the loan process will always focus on these priorities:
1. Borrowers’ right to an honest and impartial broker. We believe that every small business borrower who uses a commercial loan broker has the right to understand all the funding options they qualify for among that broker’s network, and to clearly understand any additional fees that the broker is charging the borrower throughout the loan process. For example, at Fundera, we have flat fees across our products which are typically 1 percent of a loan’s value, and never exceed 3 percent. That fee is charged to our lenders, and only our lenders, as the cost of being on our platform. Small business owners don’t pay anything to get a loan on our platform
2. Borrowers’ right to the lowest cost financing. We absolutely believe that lenders should be compensated for the risks that they take in making loans to borrowers. But, we feel just as passionately that borrowers deserve access to the lowest cost financing possible, and that’s exactly what we facilitate at Fundera. Our marketplace model, where borrowers can apply to multiple lenders with one application, pushes lenders to compete for a borrower’s business, ensuring that the borrower receives the lowest interest rates from these partners.
3. Borrowers’ right to consider options entirely free of pressure. We believe that every borrower deserves the right to understand their loan options and consider alternatives on their own timeline. They should be able to consider these options free of any direct pressure or artificial timelines of the lender. That’s why we’ll never, ever pressure a borrower into a loan.
As the online lending industry continues to mature, these rights will only become more important. After all, small businesses are the backbone of our economy, and while all of us in the industry believe the capital we help them secure leads to their growth, ensuring the way in which they receive this capital (and the price they pay to get it) is as easy, honest, and fair as possible will only help to benefit the entire industry…and America’s job creators.
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