LAS VEGAS, Oct. 24, 2016 /PRNewswire/ -- The Innovative
Lending Platform Association (ILPA)—consisting of the nation's
three largest online small business lending platforms
OnDeck® (NYSE: ONDK), Kabbage®, and CAN
Capital—in partnership with the Association for Enterprise
Opportunity (AEO), the leading advocate for microbusiness in
the United States, today
introduced the SMART (Straightforward Metrics Around Rate and Total
cost) Box™, a first-of-its-kind model pricing disclosure and
comparison tool focused on empowering small businesses to better
assess and compare finance options.
The SMART Box tool is a priority initiative for the ILPA,
developed in response to a need for common verbiage and
standardization in pricing disclosure in small business finance.
The SMART Box presents small businesses with a table of
standardized pricing comparison tools and explanations, including
the total cost of capital (TCC) and annualized percentage rate
(APR). The new model disclosure is the culmination of months of
engagement with key small business stakeholders, including lending
platforms, policymakers, not-for-profit organizations, small
business owners, and small business advocates. The ILPA and AEO
worked with these stakeholders to unite around a disclosure that
includes a third-party validation mechanism (implemented by
Navigant Consulting) and allows small businesses to make
apples-to-apples comparisons of different finance options.
How the SMART Box works:
There are currently three versions of the SMART Box
disclosure—for term loans, lines of credit, and merchant cash
advances—that take into account the differences between the
products, while still utilizing common pricing metrics and
calculations, as well as standardized language.
View more details and images of the three versions of the
SMART Box here: http://innovativelending.org/smart-box/
The SMART Box disclosure features include:
- The basic elements of the finance option under consideration,
including: the amount financed, the funds disbursed, the total
repayment amount, the expected term, and the frequency of payback
(as applicable).
- Four common pricing metrics, including TCC, APR (estimated for
merchant cash advances), the average monthly payback, and the cents
on the dollar cost of the financing option.
The TCC metric captures all interest and any other fees that are
a condition of receiving capital. This metric states the total
dollar cost of the finance option, a crucial source of information
for a small business owner.
The APR metric provides the cost of capital—including fees that
are a condition of receiving capital, when applicable—expressed as
a yearly rate. Note that while APR can be used for comparison
purposes, it is not the interest rate applied or used to
calculate the total dollar cost of the financing option. Navigant
Consulting will be responsible for validating that APR calculation
methodologies are consistent with the principles of Regulation Z
(implementing The Truth in Lending Act.)
The average monthly payment metric captures the average monthly
cash flow impact of repaying the finance option under
consideration. Regardless of whether the product requires daily,
weekly, or monthly repayment, the average monthly payment provides
a common benchmark for assessing monthly cost.
The cents on the dollar metric captures the amount of interest
(or Loan Fees, as applicable) paid
per dollar borrowed. This metric is exclusive of all other fees to
allow for comparison with other common pricing metrics in
commercial finance, including the factor rate, simple interest, and
total interest percentage.
The SMART Box presents the small business owner with two
questions regarding the prepayment policy applicable to the finance
option under consideration. The first question asks whether
prepayment will result in any new fees or charges not already
captured in the SMART Box. If the answer is "yes," the SMART Box
requires a cross-reference to clear and conspicuous disclosure in
the provider's loan documents that describes the incremental fee or
charge. The second question asks whether prepayment will result in
any reduction in interest or the applicable loan fee. If the answer
is "yes," the SMART Box requires a cross reference to clear and
conspicuous disclosure in the provider's loan documents that states
the amount of the reduction. As an enhanced disclosure, the SMART
Box helps bring the applicable prepayment policy to the attention
of the small business.
Finally, each SMART Box disclosure assumes that the finance
option will be repaid in its entirety, according to the terms of
the applicable agreement, and that no payments will be
missed.
Support for the SMART Box:
Association for Enterprise Opportunity
"The
new SMART Box tool is a game changer in driving small business
ownership through greater inclusion to capital access," said
Connie Evans, AEO's president and
CEO. "We are proud to be part of a collective cross-sector effort
to bring creative solutions to the complex issue of improving
capital access to Main Street. It should go far in helping business
owners, particularly those in underserved communities, navigate the
new frontier of lending options."
Navigant Consulting
"Navigant's Consumer
Finance practice looks forward to working with the ILPA on this
important self-regulatory initiative focused on customer
transparency by providing a quality assurance mechanism and
compliance validation," said Mike
Jones, director, Financial Services, Navigant. "We are happy
to be able to bring our expertise to this effort."
National Small Business Association
(NSBA)
"Access to capital is a top priority for NSBA and
we appreciate how SMART Box allows small businesses to more fully
assess and compare lending options. This type of price
transparency, along with best practices like the ones adopted by
the Coalition for Responsible Business Finance (CRBF),
will help solidify the trust between non-bank lenders and small
businesses," stated Todd McCracken,
NSBA president and CEO, and an advisory board member for CRBF.
Small Business & Entrepreneurship
Council
"Finding funding to start or grow your business can be an onerous
challenge for small business owners. The growth of online lending
platforms has provided small businesses with access to many more
options in this tight lending climate," remarked Kristie Arslan, Small Business &
Entrepreneurship Council's entrepreneur-in-residence. "As a small
business owner, allowing the vital information of a funding
opportunity, such as the monthly payments, total repayment amount,
cost of capital, fees, and much more, to be pulled out of the fine
print and presented with the SMART Box tool will greatly help me
and other business owners compare options and make the best funding
choice for our businesses."
Coalition for Responsible Business Finance
"The
disclosures developed by OnDeck, Kabbage, and CAN Capital for ILPA
are a positive development in enhancing price transparency to the
Non-Bank Small Business (NBSB) finance sector and the CRBF welcomes
ongoing dialogue with the ILPA on advancement of industry-wide best
practices," said longtime small business advocate and Coalition for
Responsible Business Finance (CRBF) Executive Director,
Tom Sullivan.
Electronic Transactions Association (ETA)
"ETA
believes that industry-driven standards designed to benefit small
business customers demonstrate a commitment to responsible
innovation and industry leadership," said Scott Talbott, senior vice president, ETA
Government Affairs. "We applaud the SMART Box initiative for taking
a forward-thinking approach to addressing a perceived challenge in
the market and advancing the depth of the public discussion."
LendingTree
"With the growing number of
financial products and services becoming available to small
businesses, borrowers can benefit from greater transparency in
the financing process," said Doug
Lebda, founder and CEO of LendingTree. "The ILPA's SMART Box
empowers small business owners to easily evaluate and compare
available financing options, helping businesses make smarter,
responsible, and more informed financing decisions."
Lendio
"The SMART Box is an important tool in
our industry that empowers small businesses to better understand
and contrast the cost of capital according to four standardized
pricing metrics. At Lendio, we work with over 75 lenders across
every type of small business loan product. While it is nearly
impossible to create a one-size-fits-all metric that compares all
business loan options, the SMART Box is a strong step in
the right direction," said Brock
Blake, founder and CEO of Lendio. "We're excited to share
the same vision as the ILPA and be a part of this new
initiative."
Breakout Capital
"As a long-standing proponent
of greater transparency and the industry-wide adoption of best
practices, Breakout Capital is proud to provide our endorsement of
the SMART Box," said Carl
Fairbank, founder and CEO of Breakout Capital. "Since
our founding, Breakout Capital has consistently advocated for
enhanced disclosure and cost transparency for small business
borrowers, and we view the SMART Box as an important step forward
for our industry in advancing this key mission."
The Development of the SMART Box:
Today's introduction of the SMART Box by the ILPA follows an
in-depth analysis of the small business marketplace that began in
2015 and is informed by small business survey data,
including recent findings from an Electronic Transactions
Association study, which underscores small businesses'
preferences and priorities with regard to pricing disclosure.
In June 2016, the ILPA, with
support from AEO, began a 90-day national engagement period to
solicit feedback on the SMART Box initiative from other lending
platforms, financial institutions, small business borrowers,
policymakers, small business advocates, and not-for-profit
organizations. The ILPA then designed and tested the SMART Box tool
for implementation across the platforms of the three founding
members of ILPA. The ILPA plans to encourage those interested in
promoting the responsible development of the small business lending
industry to voluntarily adopt and license the model disclosure.
Together the three founding companies of the ILPA have provided
access to more than $12 billion
dollars in capital to small businesses to help drive growth
and hiring. The ILPA will continue making enhancements to the SMART
Box over time based on usage, customer feedback, and input from
interested parties.
Founding ILPA Member Quotes:
"OnDeck is 100% focused on responsibly serving small businesses
and we are exceptionally proud of this collaborative effort to
establish industry-wide transparency best-practices that benefit
our customers," said Noah Breslow,
chief executive officer, OnDeck. "It is our belief that the SMART
Box will become the national model for small business lending
disclosure."
"Since Kabbage's founding, we've been fully committed to
empowering small business growth by providing customers with access
to the capital they need and with the deepest level of data
insights," said Kathryn Petralia,
co-founder and president, Kabbage. "The SMART Box is the next step
in advancing transparency within lending. We're confident it will
enable small businesses everywhere to make informed decisions that
can drive new levels of success."
"Since CAN Capital was founded 18 years ago by a small business
owner, it has been our mission to help small business owners
succeed by providing them with access to the working capital they
need to grow," said Daniel DeMeo,
chief executive officer, CAN Capital. "We're proud to work with the
ILPA to provide small business owners with additional transparency
to help them better understand the options our industry offers to
support them."
About the ILPA
The Innovative Lending Platform
Association (ILPA) is focused on advancing small business online
lending education, advocacy, and best practices. To promote common
disclosure verbiage and standardization, the group's first
priority—launched in partnership with the Association for
Enterprise Opportunity (AEO), the leading advocate for
microbusiness in the United States—is an initiative to create a
model small business lending disclosure called the SMART Box™.
Together the three founding companies of the ILPA—CAN Capital,
Kabbage, and OnDeck—have provided access to more than $12 billion dollars in capital to small
businesses to help drive growth and hiring. Organizations seeking
to learn more about the ILPA's mission. Please visit:
www.innovativelending.org.
About OnDeck
OnDeck (NYSE: ONDK) is the leader in
online small business lending. Since 2007, the company has powered
Main Street's growth through advanced lending technology and a
constant dedication to customer service. OnDeck's proprietary
credit scoring system—the OnDeck Score®—leverages
advanced analytics, enabling OnDeck to make real-time lending
decisions and deliver capital to small businesses in as little as
24 hours. OnDeck offers business owners a complete financing
solution, including the online lending industry's widest range of
term loans and lines of credit. To date, the company has deployed
over $5 billion to more than 50,000
customers in 700 different industries across the United States, Canada and Australia. OnDeck has an A+ rating with the
Better Business Bureau and operates the educational small business
financing website www.businessloans.com. For more information,
please visit www.ondeck.com.
About Kabbage
Kabbage Inc., headquartered in
Atlanta, GA, has pioneered a
financial services data and technology platform to provide
automated funding to small businesses in minutes. Kabbage leverages
data generated through business activity such as accounting data,
online sales, shipping and dozens of other sources to understand
performance and deliver fast, flexible funding in real time.
Kabbage is funded and backed by leading investors including
Reverence Capital Partners, SoftBank Capital, Thomvest Ventures,
Mohr Davidow Ventures, BlueRun Ventures, the UPS Strategic
Enterprise Fund, ING, Santander InnoVentures, Scotiabank, and
TCW/Craton. All Kabbage U.S.-based loans are issued by Celtic Bank,
a Utah-Chartered Industrial Bank, Member FDIC. For more
information, please visit www.kabbage.com.
About CAN Capital
CAN Capital, Inc., established in
1998, is the pioneer and market share leader in alternative small
business finance, having provided access to over $6 billion in capital for small businesses in a
wide range of locations and different business types. As a
technology-powered financial services provider, CAN Capital uses
innovative and proprietary risk models combined with daily
performance data to evaluate business performance and facilitate
access to capital for entrepreneurs in a fast and efficient way.
CAN Capital, an Inc. 5000 fastest-growing company, makes capital
available through its subsidiaries: Merchant Cash Advances by CAN
Capital Merchant Services, Inc., and business loans by CAN Capital
Asset Servicing, Inc. For more information, please visit:
www.cancapital.com and follow the company on Facebook,
Linkedin and Twitter.
About AEO
The Association for Enterprise Opportunity
(AEO) is the leading voice of innovation in microfinance and
microbusiness in the United
States. For twenty-five years, AEO and its more than 450
member organizations have helped millions of entrepreneurs
contribute to economic growth while supporting themselves, their
families and their communities. AEO members and partners include a
broad range of organizations that provide capital and services to
assist underserved entrepreneurs in starting, stabilizing and
expanding their businesses. Together, we are working to change the
way that capital and services flow to under-served entrepreneurs so
that they can create jobs and opportunities for all.
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SOURCE OnDeck