In Focus Commercial Credit Making a start
A new trade body for the alternative-lending sector is aiming to set standards of practice
John Davies Chairman, the
Association of Alternative Business Finance
john@thejust-group.com
The night before last year’s
AltFi.com annual European Summit, a group of alternative lenders and industry commentators had a working dinner to test the enthusiasm for forming a trade association for alternative lenders. The timing was judged to be right because alternative lending had come a long way since it first gained a foothold in the UK following the 2008 financial crisis. It has been well documented how traditional banks urgently needed to rebuild their capital buffers and could not fully meet the demand for finance from SMEs that wanted to invest and grow.
A range of alternative lenders moved into this space, using financial technology to make quick and well-informed lending decisions. They were happy to use fintech to provide convenient and flexible access to finance.
Consensus achieved
At the dinner, there was an immediate consensus that the challenge facing the sector was that ‘alternative lending’ meant different things to different people and SMEs, considering this type of finance had understandable questions and concerns about how these new lenders operated.
powerful reasons to form an association: standards and awareness.
Awareness was
We soon had a third when we learnt about the success the US alternative lending trade association was enjoying, through sharing data to help prevent fraud and SMEs becoming over committed.
highlighted as an issue and I was able to share some of our own research that showed 30% of businesses would shelve their investment plans if their traditional bank turned down their finance application
Additionally, awareness was highlighted as an issue and I was able to share some of our own research that showed 30% of businesses would shelve their investment plans if their traditional bank turned down their finance application.
By far the biggest reason (63%) was not being aware of alternative sources of finance. So, before we got to the coffee, we had two
Working party
It was agreed that a working party would be formed and that is when the hard work started – drafting and agreeing the best standards of industry practice that members of the Association of Alternative Business Finance (AABF) would be required to agree to.
The original working group become the seven founding members: Capify UK, Catalyst Finance, Credit4, Fleximize, Liberis, The Just Loans Group, and YesGrowth.
The AABF was officially launched on 1 February 2017 promoting the best practice in UK alternative lending, with members adhering to four key operating principles: Transparency. Responsibility. Fairness. Security.
Below are just a few examples of the commitments that underpin the transparency principle alone: Disclose all fees and charges together with the amount of funds provided, and the total amount owed to the member. These terms should be disclosed, in a clear and transparent way, in documentation that is easily understood. Clearly disclose how the funding and repayment process works, the frequency of payments, and the amount of each payment, as applicable.
14
www.CCRMagazine.co.uk March 2017
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