Small Business Loans Made Easy Thanks to New Partnerships
Alternative and online lenders have made it easier than ever for entrepreneurs to secure loans for their businesses. Additionally some of those online lenders are now working with non-profit organizations to further promote the expansion of small business in America. Community development financial institutions (CDFIs), which assist business owners with little to no credit, are getting a big boost by utilizing FinTech platforms.
As reported by NerdWallet, in June of this year, peer to peer lender Lending Club announced that they would be partnering with Opportunity Fund — a California-based CDFI — to offer loans to those who might not regularly qualify. Beginning in January of next year borrowers who don’t meet requirements for a small business loan directly through Lending Club but meet Opportunity Fund’s standards will automatically be redirected. In such cases Opportunity Fund will underwrite and service the loan.
The Opportunity Fund/Lending Club loans will allow business owners to borrow between $2,600 and $100,000 for a period of one to five years. Additionally APRs will start at just 10.6%. At the time the deal was announced, former president Bill Clinton said, “Access to capital for entrepreneurs is key to restoring real economic mobility, job creation and the economic health of the middle class. Opportunity Fund and Lending Club are committed to pilot an unprecedented partnership.” While this deal will only cover borrowers in California, it sets a strong precedent and opens the doors to partnerships in the future.
These types are alliances make perfect sense seeing as alternative lenders have helped fill the void left by larger banks pulling back on loan operations. Due to the low costs associated with doing business strictly on the internet, FinTech companies like Lending Club and Kabbage have been able to offer loans at a better rates. Even if it might not behoove these lenders to grant loans to entrepreneurs with bad or non-existent credit, having a non-profit underwrite it is a win-win.
Overall these relationships between online lenders and non-profit organization help foster entrepreneurship. Just as Lending Club’s platform typically matches borrowers with investors willing to fulfill their loan, these deals help underserved small business owners get access to the capital they need quickly and easily. As the FinTech sector continues to grow, expect more of these types of partnerships to blossom in the coming years.