Seven fintech lenders up transparency for SME borrowers
Seven fintech lenders have achieved compliance with the Australian Finance Industry Association (AFIA) Online Small Business Code of Lending Practice, giving way for the introduction of a new pricing disclosure tool to help SMEs understand loan products.
Small businesses seeking online secured and unsecured loans will now enjoy a higher level of transparency after Lumi became the seventh online lender to achieve compliance with the AFIA Online Small Business Code of Lending Practice, AFIA said.
The seven AFIA compliant fintechs are now Capify, GetCapital, Lumi, Moula, OnDeck, Prospa and Spotcap.
While these lenders are already subject to regulation, including the ASIC Act, Privacy Act, and anti-money laundering laws, AFIA explained that the code will see the lenders comply with a standard above these requirements in potential areas of small business risk.
“We are pleased to have reached another milestone in online lending transparency and disclosure for small businesses, with seven balance sheet lenders now fully compliant with the Online Small Business Lenders’ Code of Lending Practice,” Australian Small Business and Family Enterprise Ombudsman Kate Carnell said.
The code, which will be managed by the Code Compliance Committee (CCC), has attracted interest from several other online small business lenders that offer an online small business loan product and are keen to sign up.
“We would now like to see all fintechs that offer online small business loans to sign up to this code, to provide an alternative finance solution for small businesses,” Ms Carnell noted.
SME advocate Neil Slonim (theBankDoctor.org) praised the code, calling also on all non-bank SME lenders to follow the lead set by the founding signatories.
“As SMEs increasingly look for finance outside the big four banks, it is more important than ever that they are able to easily work out the total cost of finance and make apples with apples comparisons between alternative lenders,” Mr Slonim said.
Apart from announcing the seventh signatory to the code, AFIA introduced the SMART Box pricing comparison tool, which adds further transparency for borrowers.
Developed by US-based Innovative Lending Platform Association (ILPA), SMART Box gives SMEs a tool to easily compare different online lenders’ small business loan product pricing using several metrics standardised in calculation and presentation.
Scott Stewart, chief executive of ILPA, applauded AFIA and the seven signatories to the code and their industry leadership in adopting the SMART Box.
“We believe small businesses can benefit from greater transparency in pricing in the financing process,” he said.