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Small Business Administration
From Wikipedia, the free encyclopedia
Small Business Administration
Seal of the United States Small Business Administration.svg
US-SmallBusinessAdmin-Logo.svg
Small Defense Plants Administration, Reconstruction Finance Corporation
Jurisdiction Federal government of the United States
Headquarters 409 Third Street, SW, Washington, D.C.
Employees 3,293 (2015)[1]
Annual budget $710 million USD (2015)[2]
Linda McMahon, Administrator
Althea Coetzee, Deputy Administrator
The Small Business Administration (SBA) is a United States government agency that provides support to entrepreneurs and small businesses. The mission of the Small Business Administration is "to maintain and strengthen the nation's economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters". The agency's activities are summarized as the "3 Cs" of capital, contracts and counseling.[3]
SBA loans are made through banks, credit unions and other lenders who partner with the SBA. The SBA provides a government-backed guarantee on part of the loan. Under the Recovery Act and the Small Business Jobs Act, SBA loans were enhanced to provide up to a 90 percent guarantee in order to strengthen access to capital for small businesses after credit froze in 2008. The agency had record lending volumes in late 2010.[4]
SBA helps lead the federal government's efforts to deliver 23 percent of prime federal contracts to small businesses. Small business contracting programs include efforts to ensure that certain federal contracts reach woman-owned and service-disabled veteran-owned small businesses as well as businesses participating in programs such as 8(a) and HUBZone.[5]
SBA has at least one office in each U.S. state. In addition, the agency provides grants to support counseling partners, including approximately 900 Small Business Development Centers (often located at colleges and universities), 110 Women's Business Centers, and SCORE, a volunteer mentor corps of retired and experienced business leaders with approximately 350 chapters. These counseling services provide services to over 1 million entrepreneurs and small business owners annually. President Obama announced in January 2012 that he would elevate the SBA into the Cabinet, a position it last held during the Clinton administration,[6] thus making the Administrator of the Small Business Administration a cabinet-level position.
2 Organizational structure
3.1 Loan Guarantee Program
3.2 504 Fixed Asset Financing Program
3.4 Disaster Loan Program
4 Entrepreneurial development programs
4.1 Small Business Development Centers
4.2 Women's Business Centers
4.3 Service Corps of Retired Executives (SCORE)
4.4 Veteran Business Outreach Centers (VBOC)
4.5 Innovation and Strategic Initiatives
5 Federal contracting and business development programs
5.1 8(a) Business Development Program
7 Small Business Investment Companies
The SBA was created on July 30, 1953, by President Eisenhower with the signing of the Small Business Act, currently codified at 15 U.S.C. ch. 14A. The Small Business Act was originally enacted as the "Small Business Act of 1953" in Title II (67 Stat. 232) of Pub.L. 83–163 (ch. 282, 67 Stat. 230, July 30, 1953); The "Reconstruction Finance Corporation Liquidation Act" was Title I, which abolished the Reconstruction Finance Corporation (RFC). The Small Business Act Amendments of 1958 (Pub.L. 85–536, 72 Stat. 384, enacted July 18, 1958) withdrew Title II as part of that act and made it a separate act to be known as the "Small Business Act". Its function was and is to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns".
The SBA has survived a number of threats to its existence. In 1996, the Republican-controlled House of Representatives planned to eliminate the agency.[7] It survived and went on to receive a record high budget in 2000.[8] Renewed efforts by the Bush Administration to end the SBA loan program met congressional resistance, although the SBA's budget was repeatedly cut, and in 2004 certain expenditures were frozen. The Obama Administration has supported the SBA budget. Significant supplemental appropriations for the agency strengthened SBA lending through the American Recovery and Reinvestment Act of 2009 and the Small Business Jobs Act of 2010.[9]
Organizational structure[edit]
The SBA has an Administrator and a Deputy Administrator. It has an associate administrator or director for the following offices:[10]
Communications and Public Liaison
Congressional and Legislative Affairs
Entrepreneurial Development
Entrepreneurship Education
Equal Employment Opportunity and Civil Rights Compliance
Faith Based and Neighborhood Partnerships
Government Contracting and Business Development
Investment and Innovation
Management and Administration
Small Business Development Centers
Veterans Business Development
Women's Business Ownership
Senate-confirmed appointees include: Administrator, Deputy Administrator, Chief Counsel for Advocacy, and Inspector General.
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The most visible elements of the SBA are the loan programs it administers. The SBA does not provide grants or direct loans with the exception of Disaster Relief Loans. Instead, the SBA guarantees against default certain portions of business loans made by banks and other lenders that conform to its guidelines.
The primary use of the programs is to make loans for longer repayment periods based in part upon looser underwriting criteria than normal commercial business loans, though these programs can enable owners with bad credit to receive a loan. A business can qualify for the loan even if the yearly payment approximates previous year's profit. Most banks want annual payment for loans no more than two-thirds (2/3) of prior year's operating profits. Lower payments, longer terms and loosened criteria allow some businesses to borrow more money than otherwise.
One of the most popular uses of SBA loans is commercial mortgages on buildings occupied or to be occupied by small business. These programs are beneficial to small business because most bank programs frequently require larger down payments and/or have repayment terms requiring borrowers refinance every five years. They can be beneficial to the bank in that banks can reduce risk by taking a first-lien position for a smaller percentage of the project, then arranging for a SBA Certified Development Company to finance the remainder through a second-lien position.
Loan Guarantee Program[edit]
The 7(a) Loan Guarantee Program is designed to help entrepreneurs start or expand their small businesses. The program makes capital available to small businesses through bank and non-bank lending institutions.[11] The Small Business Jobs Act of 2010 permanently increased the maximum size of these loans from $2 million to $5 million. if
504 Fixed Asset Financing Program[edit]
The 504 Fixed Asset Financing Program is administered through non-profit Certified Development Companies throughout the country. This program provides funding for the purchase or construction of real estate and/or the purchase of business equipment/machinery. Of the total project costs, a lender must provide 50% of the financing, a Certified Development Company provides up to 40% of the financing through a 100% SBA-guaranteed debenture, and the applicant provides approximately 10% of the financing. Thorough due diligence of properties purchased through this program is required. Specific SBA Level I Environmental Site Assessment guidelines apply as all properties are treated as "high risk." The Small Business Jobs Act permanently increased the maximum size of these loans from $2 million to $5 million ($5.5 million for manufacturers).
The Small Business Jobs Act increased the maximum amount of SBA microloans from $35,000 to $50,000. These are offered through non-profit microloan financial intermediaries.
Disaster Loan Program[edit]
SBA opens Disaster Loan Center in Austell, GA, October 26, 2009
Homeowners and renters are eligible for long-term, low-interest loans to rebuild or repair a damaged property to pre-disaster condition.[12] Before making a loan, the SBA must establish the cost of repairing or rebuilding the structure (determined by SBA's Field Inspectors who visit the property), applicant's repayment ability (determined by applicant's creditworthiness and income) and whether the applicant can secure credit in the commercial market (called the credit elsewhere test). Applicants who do not qualify for disaster assistance loans are referred to the Federal Emergency Management Agency (FEMA) for grants. Although SBA won’t decline a loan for lack of collateral, the agency is statutorily required to collateralize whatever assets are available including the damaged property, a second home or other real estate.
Businesses are also eligible for long-term, low-interest loans to recover from declared disasters.[13] Similar to the homeowner's loan program mentioned above, small business owners pledge any available assets and acquire a similar pledge from a spouse or partner in the case of shared assets. If defaulting on the debt, the spouse or partner must surrender their value in the assets. The total value of an applicant’s assets is not considered by the SBA; therefore, a company may be approved for a loan regardless of whether that entity has little or substantial net worth.
Once an SBA loan is approved, the SBA mails closing documents to the applicant for signature. Disbursements include an initial unsecured amount of $25,000 (See latest fact sheet), and subsequent disbursements depending upon construction progress and continued insurance coverage. After final disbursement, the loan is transferred to one of the SBA's servicing offices for management, or to its collections office in the case of default.
Disaster Relief Loans are often approved within 21 days. However, after Hurricane Katrina the SBA processed applications, on average, in about 74 days.[14]
If a business with a Disaster Relief Loan defaults on the loan, and the business is closed, the SBA will pursue the business owner to liquidate all personal assets, to satisfy an outstanding balance. The IRS will withhold any tax refund expected by the former business owner and apply the amount toward the loan balance.
Entrepreneurial development programs[edit]
Small Business Development Centers[edit]
Approximately 900 Small Business Development Center sites are funded through a combination of state and SBA support in the form of matching grants. Typically, SBDCs are co-located at community colleges, state universities, and/or other entrepreneurial hubs. Cole Browne leads the SBA in purchasing of new Development Center sites.
Women's Business Centers[edit]
Women's Business Centers (WBCs) represent a national network of over 100 non-profit educational centers throughout the United States and its territories, funded in part through SBA support.[15] The maximum SBA grant for a WBC is $150,000 per year, although most centers receive less.[15] WBCs are required to provide non-federal matching funds of 50% of the grant in the first two years and 100% thereafter.
WBCs are designed to assist women in starting and growing small businesses, though their services are available to all.[16] WBCs help women succeed in business by providing training, mentoring, business development, and financing opportunities to over 100,000 women entrepreneurs annually across the nation.[15] Women’s Business Centers are mandated to serve a significant number of socially and economically disadvantaged individuals.[16]
Research conducted by the Association of Women’s Business Centers indicates that 64% of WBC clients in 2012 were low-income, 39% were persons of color, and 70% were nascent businesses.[17] WBC services are provided in more than 35 languages, with 64% of WBCs providing services in two or more languages. In addition to business training services, 68% of WBCs provide mentoring services, and 45% provide microloans.[17]
Service Corps of Retired Executives (SCORE)[edit]
SBA annually grants SCORE[18] the funds to oversee approximately 350 chapters volunteers who provide free mentoring and counseling to entrepreneurs and small business ownership.
Veteran Business Outreach Centers (VBOC)[edit]
SBA's Office of Veteran Business Development operates twenty[19] Veteran Business Outreach Centers[20] through grants and cooperative agreements with organizations which provide technical assistance to businesses owned by veterans and family members. VBOCs also provide instructors for the SBA's program Boots to Business.[21] Boots to Business is delivered in partnership with SBA’s Resource Partners, SCORE Mentors, Small Business Development Centers, Women’s Business Centers, and Veterans Business Outreach Centers and the Institute for Veterans and Military Families at Syracuse University. It is available free on participating installations to service members and their dependents transitioning or retiring from the U.S. military. Additional SBA resources for veterans are available from http://www.sba.gov/vets.
Innovation and Strategic Initiatives[edit]
The SBA also supports regional innovation clusters across the country.[22]
Federal contracting and business development programs[edit]
8(a) Business Development Program[edit]
The 8(a) Business Development Program assists in the development of small businesses owned and operated by individuals who are socially and economically disadvantaged, such as women and minorities. The following ethnic groups are classified as eligible: Black Americans; Hispanic Americans; Native Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians); Asian Pacific Americans (persons with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China (including Hong Kong), Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Fiji, Tonga, Kiribati, Tuvalu, or Nauru); Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal). In 2011, the SBA, along with the FBI and the IRS, uncovered a massive scheme to defraud this program. Civilian employees of the U.S. Army Corps of Engineers, working in concert with an employee of Alaska Native Corporation Eyak Technology LLC allegedly submitted fraudulent bills to the program, totaling over 20 million dollars, and kept the money for their own use.[23] It also alleged that the group planned to steer a further 780 million dollars towards their favored contractor.[24]
HUBZone is an SBA program for small companies that operate and employ people in Historically Underutilized Business Zones (HUBZones). The HUBZone program was created in response to the HUBZone Empowerment Act created by the US Congress in 1998.
The SBA loan industry can be divided into distinct categories:
Large bank institutions, such as Chase, Bank of America and Wells Fargo, generate the bulk of their SBA loan volume by loans, especially the express loan and line of credit, offered to those who would be declined for 'normal' bank credit due to factors such as length of time in business or slightly more conservative underwriting factors. Banks have sophisticated computer systems that generally make this process seamless, and are quite different from other financial institutions who utilize SBA lending for separate and distinct purposes.
SBA loans are used heavily by banks of all sizes to finance the purchase or construction of business owner-occupied real estate (i.e., real property purchased for commerce). Many banks offer SBA loans only for this purpose. In particular, they finance properties that a bank would consider too risky to finance conventionally, due to being of a special use [bowling alley, automobile repair] or environmentally risky nature [petroleum products storage, electrical substation] that can make their resale value limited. Some example properties include motels, gas stations and car washes.
SBA loans also encourage individuals to buy existing business. Since, unlike in real estate transactions, commercial lenders can fund referral fee earned by business brokers helping people buy and sell businesses, this segment of industry is supported by smaller banks and standalone finance companies who understand this sector.
Small Business Investment Companies[edit]
One of the first steps toward a professionally managed private equity and venture capital industry was the passage of the Small Business Investment Act of 1958. The 1958 Act officially allowed the SBA to license private "Small Business Investment Companies" (SBICs) to help with financing and managing small entrepreneurial businesses in the United States. Passage of the Act addressed concerns raised in a Federal Reserve Board report to Congress that concluded that a major gap existed in the capital markets for long-term funding for growth-oriented small businesses. Additionally, it was thought that fostering entrepreneurial companies would spur technological advances to compete with the Soviet Union. Facilitating the flow of capital through the economy up to the pioneering small concerns in order to stimulate the U.S. economy was and still is today the main goal of the SBIC program.[25] The passage of the Small Business Investment Act of 1958 by the federal government was an important incentive for would-be venture capital organizations.[citation needed] The act provided venture capital firms structured either as SBICs or Minority Enterprise Small Business Investment Companies (MESBICs) access to federal funds which could be leveraged at a ratio of up to 4:1 against privately raised investment funds. In 2005, in response to extensive losses incurred in connection with tech boom investments, the SBA decided to wind down its "Participating Securities" SBIC program, which had provided equity-like SBA backing for equity-oriented SBIC funds. The SBA's "Debenture" SBIC program, the original SBIC vehicle founded in 1958, continues to license and contribute capital to SBIC funds.[citation needed] The SBIC program had its highest ever year in Fiscal Year 2010.[26]
The Cato Institute has challenged the justification of the federal government in intervening in credit markets.[27][28] Among other criticisms, Cato argues that "the SBA benefits a relatively tiny number of small businesses at the expense of the vast majority of small business that do not receive government assistance. SBA subsidies also represent a form of corporate welfare for the banking industry." Cato notes that the failure rate of all SBA loans from 2001 to 2010 is 19.4%,[27] contributing to a cost to taxpayers of $6.2 billion in 2011.[29]
In 2005, SBA Inspector General Report 5-15 stated, “One of the most important challenges facing the Small Business Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.”[30]
In October 2009, the Government Accountability Office released Report 10-108 which stated, "By failing to hold firms accountable, SBA and contracting agencies have sent a message to the contracting community that there is no punishment or consequences for committing fraud."[31]
Administrator of the Small Business Administration
Title 13 of the Code of Federal Regulations
Jump up ^ https://www.sba.gov/about-sba/sba-performance/performance-budget/congressional-budget-justificationannual-performance-reports. Missing or empty |title= (help)
Jump up ^ - "Small Business Administration Fiscal Year 2015 Congressional Budget Justification and Fiscal Year 2013 Annual Performance Report Fiscal Year 2015 Congressional Budget Justification and Fiscal Year 2013 Annual Performance Report" Check |url= value (help).
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Jump up ^ Atlanta Journal Constitution http://www.ajc.com/business/small-business-loans-soar-795135.html. Missing or empty |title= (help)
Jump up ^ "SBA News Release".
Jump up ^ Emily Maltby (13 January 2012). "Obama to Elevate SBA Chief". WSJ. Retrieved 9 May 2016.
Jump up ^ "Reducing the Deficit: Spending and Revenue Options, Section 9" (PDF). Congressional Budget Office. March 1997.
Jump up ^ "Small Business: Expectations of Firms in SBA's 8(a) Program Are Not Being Met". Government Accountability Office. July 20, 2000.
Jump up ^ "Office of Management and Budget, White House" (PDF).
Jump up ^ "Our People". Small Business Administration. Retrieved 19 November 2013.
Jump up ^ "New Rules Make SBA Loans Easier To Obtain".
Jump up ^ "SBA: Home and Personal Property Loans". Retrieved 23 July 2014.
Jump up ^ "SBA: Business Physical Disaster Loans". Retrieved 23 July 2014.
^ Jump up to: a b c "Women’s Business Centers: Effectively Growing Entrepreneurship". http://www.awbc.org. Association of Women's Business Centers. Retrieved 11 November 2014. External link in |website= (help)
^ Jump up to: a b "Women's Business Centers". http://www.sba.gov. Small Business Administration. Retrieved 11 November 2014. External link in |website= (help)
^ Jump up to: a b "Women’s Business Center Overview" (PDF). http://www.awbc.org. Association of Women's Business Centers. Retrieved 11 November 2014. External link in |website= (help)
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Jump up ^ "Veterans Business Centers Receive Funding To Expand Entrepreneurship Outreach". https://www.sba.gov/offices/headquarters/ovbd/resources/362341. Small Business Administration. Retrieved 8 May 2015. External link in |website= (help)
Jump up ^ "Office of Veterans Business Development Resources". SBA. Retrieved 2015-05-08.
Jump up ^ "Clusters". Small Business Administration. Retrieved 6 May 2017.
Jump up ^ LibCasey, C-SPAN (4 October 2011). "EyakTek Director Arrested in Major Bribery Case". Alaska Public Media. Retrieved 9 May 2016.
Jump up ^ Press release, 10/4/201/ Ronald C. Machen Jr, U.S. Attorney for the District of Columbia, U.S. Department of Justice
Jump up ^ "SBA Offices and Resource Partners". Retrieved 9 May 2016.
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^ Jump up to: a b "Terminating the Small Business Administration". Cato Institute. August 2011. Retrieved 2012-08-23.
Jump up ^ Terminating the Small Business Administration - Reader Response | Cato @ Liberty. Cato.org (2012-08-22). Retrieved on 2013-08-12.
Jump up ^ Budget of the United States Government, Fiscal Year 2012. Washington: Government Printing Office. 2011. pp. 161–62.
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SBA in the Federal Register
Public Law 85-699, 85th Congress, S. 3651: Small Business Investment Act of 1958
Official SBA YouTube Channel
Categories: Small Business AdministrationFinancial regulatory authorities of the United StatesGovernment agencies established in 1953Organizations based in Washington, D.C.
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From Wikipedia, the free encyclopedia
This article needs more links to other articles to help integrate it into the encyclopedia. Please help improve this article by adding links that are relevant to the context within the existing text. (May 2014) (Learn how and when to remove this template message)
Small business financing (also referred to as startup financing or franchise financing) refers to the means by which an aspiring or current business owner obtains money to start a new small business, purchase an existing small business or bring money into an existing small business to finance current or future business activity. There are many ways to finance a new or existing business, each of which features its own benefits and limitations. In the wake of the financial crisis of 2007–08, the availability of traditional types of small business financing dramatically decreased.[1] At the same time, alternative types of small business financing have emerged. In this context, it is instructive to divide the types of small business financing into the two broad categories of traditional and alternative small business financing options.
1 Traditional small business financing options
4 Rollover retirement funds to start or finance a business
5 New sources of debt and equity financing
Traditional small business financing options[edit]
There have traditionally been two options available to aspiring or existing entrepreneurs looking to finance their small business or franchise: borrow funds (debt financing) or sell ownership interests in exchange for capital (equity financing).
The principal advantages of borrowing funds to finance a new or existing small business are typically that the lender will not have any say in how the business is managed and will not be entitled to any of the profits that the business generates. The disadvantages are the payments may be especially burdensome for businesses that are new or expanding.
Failure to make required loan payments will risk forfeiture of assets (including possibly personal assets of the business owners) that are pledged as security for the loan.
The credit approval process may result in some aspiring or existing business owners not qualifying for financing or only qualifying for high interest loans or loans that require the pledge of personal assets as collateral. In addition, the time required to obtain credit approval may be significant.
Excessive debt may overwhelm the business and ultimately risks bankruptcy. For example, a business that carries a heavy debt burden may face an increased risk of failure.[2]
The sources of debt financing may include conventional lenders (banks, credit unions, etc.), friends and family, Small Business Administration (SBA) loans, technology based lenders,[3][4][5] microlenders, home equity loans and personal credit cards. Small business owners in the US borrow, on average, $23,000 from friends and family to start their business.[6]
The duration of a business loan is variable and could range from one week to five or more years, and speed of access to funds will depend on the lender's internal processes. Private lenders are swift in turnaround times and can in many cases settle funds on the same day as the application, whereas traditional big banks can take weeks or months.
The principal practical advantage of selling an ownership interest to finance a new or existing small business is that the business may use the equity investment to run the business rather than making potentially burdensome loan payments. In addition, the business and the business owner(s) will typically not have to repay the investors in the event that the business loses money or ultimately fails. The disadvantages of equity financing include the following:
By selling an ownership interest, the entrepreneur will dilute his or her control over the business.
The investors are entitled to a share of the business profits.
The investors must be informed of significant business events and the entrepreneur must act in the best interests of the investors.
In certain circumstances, equity financing may require compliance with federal and state securities laws.
The sources of equity financing may include friends and family, angel investors, and venture capitalists.
Rollover retirement funds to start or finance a business[edit]
A lesser-known but well-established means for entrepreneurs to finance a new or existing business is to rollover their 401k, IRA or other retirement funds into their franchise or other business venture. This financing option is often called "Rollover as business startup" or "ROBS" financing. This isn't a loan: instead, the business owner forms a C Corporation, which sponsors a profit sharing retirement plan. From there, the business owner uses that company retirement plan to buy shares of his own company, thus contributing to the company's finances.[7]
This small business financing option allows the business owner to obtain the benefits of debt and equity financing while avoiding the disadvantages such as burdensome debt payments. More than 10,000 entrepreneurs have used their retirement funds to finance their start-up businesses.[8]
The IRS has clearly stated that the use of retirement funds to finance a small business is not “per se” non-compliant. ROBS financing is complicated, however, and the IRS has developed a set of guidelines for ROBS financing.[9] As such it is essential to employ experienced professionals to assist with this small business financing strategy.
New sources of debt and equity financing[edit]
In the wake of the decline of traditional small business financing, new sources of debt and equity financing have increased including Crowdfunding and Peer-to-peer lending. Unless small businesses have collateral and can prove revenue, banks are hesitant to lend money. Often times start up companies and businesses operating for less than a year do not have collateral and private money lenders or angel investors are a better option. Private money lenders and angel investors are willing to take more risk than banks recognizing the potential upside. Private lenders can also reach a decision faster with approvals only going through one tier rather than being overlooked by many levels of management.
Jump up ^ Cole, Rebel. "How Did the Financial Crisis Affect Small Business Lending in the United States?" (PDF). Depaul University. Retrieved 14 February 2013.
Jump up ^ Faust, Jon. "Will Higher Corporate Debt Worsen Future Recessions?" (PDF). Retrieved 14 February 2013.
Jump up ^ Patrick Clark. "Alternative Small Business Lender OnDeck Doubles Its Revenue - Businessweek". Businessweek.com.
Jump up ^ Ianthe Jeanne Dugan and Ruth Simon (8 January 2014). "Alternative Lenders Peddle Pricey Commercial Loans". WSJ.
Jump up ^ "Need A Business Loan? Impress The Algorithm, Not The Loan Officer". Forbes. 27 March 2013.
Jump up ^ Laura Entis (20 November 2013). "Where Startup Funding Really Comes From (Infographic)". Entrepreneur.
Jump up ^ Prosser, Marc. "Rollover for Business Startup (ROBS) Financing Guide". Fit Small Business. Retrieved 6 November 2015.
Jump up ^ McManus, Brian; Matthews, Mark. "Examinations of Rollovers as Business Start-Ups (ROBS) Arrangements: A Guide to Surviving IRS Scrutiny". BNA, Inc.
Jump up ^ Julianelle, Michael. "Guidelines regarding rollovers as business start-ups" (PDF). U.S. Internal Revenue Service. Retrieved 6 November 2015.
Categories: Corporate finance
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From Wikipedia, the free encyclopedia
SME finance is the funding of small and medium-sized enterprises, and represents a major function of the general business finance market – in which capital for different types of firms are supplied, acquired, and costed or priced. Capital is supplied through the business finance market in the form of bank loans and overdrafts; leasing and hire-purchase arrangements; equity/corporate bond issues; venture capital or private equity; and asset-based finance such as factoring and invoice discounting.[1]
However, not all business finance is external/commercially supplied through the market. Much finance is internally generated by businesses out of their own earnings and/or supplied informally as trade credit, that is, delays in paying for purchases of goods and services.
3 The management of business lending
4 Different Types of Lenders
The economic and banking importance of the small and medium enterprise (SME) sector is well recognized in academic and policy literature.[2][3] It is also acknowledged that these actors in the economy may be under-served, especially in terms of finance.[4] This has led to significant debate on the best methods to serve this sector.
Although there have been numerous schemes and programmes in different economic environments, there are a number of distinctive recurring approaches to SME finance.[5]
Collateral based lending offered by traditional banks and finance companies is usually made up of a combination of asset-based finance, contribution based finance, and factoring based finance, using reliable debtors or contracts.
Information based lending usually incorporates financial statement lending, credit scoring, and relationship lending.
Viability based financing is especially associated with venture capital.
Reliable for all the small ticket loan.
A substantial portion of the SME sector may not have the security required for conventional collateral based bank lending, nor high enough returns to attract formal venture capitalists and other risk investors. In addition, markets may be characterized by deficient information (limiting the effectiveness of financial statement-based lending and credit scoring). This has led to claims of an "SME finance gap" or Nano gap [6]– particularly in emerging economies.[7] At a workshop hosted by The Network for Governance, Entrepreneurship & Development (GE&D) in Geneva in July 2008, SMEs that fall into this category have been defined as Small Growing Businesses (SGBs).[8]
There have been at least two distinctive approaches to try to overcome the so-called SME finance gap.
The first has been to broaden the collateral based approach by encouraging bank lenders to finance SMEs with insufficient collateral. This might be done through an external party providing the collateral or guarantees required. Unfortunately, such schemes are counter to basic free market principles, and they tend to be unsustainable. This sector is increasingly called the Meso-finance sector.[9]
However, there are no evidence of any significant structural barriers to the supply of bank or private equity finance to suitable SME applicants on mutually satisfactory terms and conditions in Britain. The main obstacles to funding here appear to be on the demand rather than the supply side of the business finance market. This is mainly in the form of:
Lack of satisfactory business plans, accounting and other information;
Inadequate assets for use as security; and,
Insufficiently high levels of profitability, gearing, liquidity, stability, and other business-financial performance criteria on the part of funding applicants.[10]
Thus, the second approach has been to broaden the viability based approach. Since the viability based approach is concerned with the business itself, the aim has been to provide better general business development assistance[11] to reduce risk and increase returns. This often entails a detailed review and assistance with the business plan.
A common aim or feature of the viability based approach is the provision of appropriate finance that is tailored to the cash flows of the SME.
Although the returns generated by this approach in less developed countries may not be attractive to venture capitalists, they can be significantly better than conventional collateral based lending – whilst at the same time being less risky than the typical venture capitalist business. Thus, a new, distinct asset class, offering a new avenue for diversification, is available to investors. With higher profitability than traditional SME finance and lower risk than traditional venture capital, this sector has been named the "growth finance sector".
In the past, a significant obstacle to applying this approach in less developed countries has been getting the information required to assess viability, plus the costs of transferring and providing business development assistance. However, in the last several years, improved information and communications technology have made the process easier and cheaper. As technology and information sharing continue to improve, the approach could become significantly more cost-effective and attractive to established financiers with viability based approaches, and to consultants providing business development assistance to SMEs in other, more mainstream areas.
Some investors have promoted this approach as a means of achieving wider social benefits,[12] while others have been interested in developing it largely in order to generate better financial-economic returns for shareholders, investors, employees, and clients.
A new organisation, Aspen Network for Development Entrepreneurs (ANDE),[13] has been created to bring the growth finance stakeholders together, with the view to evolve into an association serving the sector, similar to what venture capital or microfinance associations do. They have declared their target audience to be Small Growing Businesses.
In 2008, a group of financial service providers and other stakeholders came together to form the Finance Alliance for Sustainable Trade (FAST).[14] FAST is an association of financial service providers explicitly committed to improving access to finance for sustainable SMEs—defined as SMEs that are compliant with one or more of a host of growing sustainability standards (such as organics, fair trade, forest stewardship council etc.). FAST states that one of its objectives is to improve access to finance for SMEs by linking sustainable trading relationships with sustainable production practices—both of which have been observed to reduce the risk profile of SMEs in traditionally high risk sectors.[15]
The management of business lending[edit]
The effective management of lending to SMEs can contribute significantly to the overall growth and profitability of banks. There has been considerable research and analysis into the methods by which banks assess and monitor business loans, manage business financing risks, and price their products – and how these methods might be further developed and improved.[16][2]
There has been particularly intensive scrutiny of the kinds of business financial information that banks use in making lending decisions, and how reliable that information actually is.
Banks have traditionally relied on a combination of documentary sources of information, interviews and visits, and the personal knowledge and expertise of managers in assessing and monitoring business loans. However, when assessing comparatively small and straightforward business credit applications, banks may largely rely on standardized credit scoring techniques (quantifying such things as the characteristics, assets, and cash flows of businesses/owners). Using such techniques – and also centralizing or rationalizing business-banking operations generally – can significantly reduce processing costs. Standardized computer-based assessment may also be more accurate and fairer than reliance on the personal judgments of local bank managers. As a result, banks may now be able to offer more loans, faster and in larger amounts, and reduce previously high security requirements.[17]
However, business lending as a whole is substantially more diverse and complex than personal and residential mortgage lending. This, coupled with the large size and inherently risky nature of many business loans, tend to limit the scope and desirability of computerized credit scoring in assessment and monitoring.[18]
Different Types of Lenders[edit]
Small Business Administration Loans – These are government-backed loans. The government basically doesn’t offer the finance but lays down a set of rules and regulations for approved partners like banks, NBFCs and microfinance entities to provide the loans. For the lender, it means lower risk and for the borrower, it means comparatively lower interest rates. But for those who need loans on a really short notice or don’t have access to all the paperwork that is needed, this option rarely works out. Plus, there are a lot of extra fees to be paid
Conventional Business Loans from Banks – Banks provide SBA loans and they also provide loans on their own terms and conditions. Here, the government is not guaranteeing that the bank will be receiving its money back. Hence, it all comes down to how the bank sees your business. If your business is perceived as a profitable one, you might get lesser interest rates than advertised and will not require to adhere to very stringent rules as the SBA loans. The approval process can be faster, though it’s often difficult to get approved by banks. The repayment duration is shorter than SBA loans
Business Financing from Alternative Lenders – When it comes to faster turnaround times and lesser rules and regulations, these options are the best. Be it small businessmen who have started their journey or established business owners with high margins, alternative lenders are preferred for almost immediate business financing. The flipside to these lenders is that the interest rates can be comparatively much higher for a first-time borrower.[19][3]
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Indian SME Finance News, Events and Articles
Small & Medium-Sized Business Finance: A Review
Innovative financing for sustainable small and medium enterprises in Africa
Making Finance Work for Africa: SME Finance & Leasing
Categories: EntrepreneurshipCorporate finance
From Wikipedia, the free encyclopedia
A business loan is a loan specifically intended for business purposes.[1] As with all loans, it involves the creation of a debt, which will be repaid with added interest. There are a number of different types of business loans, including bank loans, mezzanine financing, asset-based financing, invoice financing, microloans, business cash advances and cash flow loans.[2]
2 Secured and unsecured business loans
A bank loan may be obtained from a bank and may be either secured or unsecured. For secured loans, banks will require collateral, which may be lost if repayments are not made. The bank will probably wish to see the business’s accounts, balance sheet and business plan, as well as studying the principals' credit histories. Many smaller businesses are now however turning towards Alternative Finance Providers, especially in the case of smaller firms.[3]
Loans from credit unions may be referred to as bank loans as well. Business loans from credit unions received the second highest level of satisfaction from borrowers after loans from small banks.[4]
The US Small Business Administration (SBA) does not make loans; instead it guarantees loans made by individual lenders. The main SBA loan programs are SBA 7(a) which includes both a standard and express option; Microloans (up to $50,000); 504 Loans which provide financing for fixed assets such as real estate or equipment; and Disaster loans. In FY 2016, total 7(a) volume was $11,967,861,900 and total 504 loan volume was $2,517,433,000.[5]
Main article: mezzanine capital
Mezzanine finance effectively secures a company’s debt on its equity, allowing the lender to claim part-ownership of the business if the loan is not paid back on time and in full.[6] This allows the business to borrow without putting up other collateral, but risks diluting the principals’ equity share in case of default.
Asset-based finance[edit]
Main article: Asset-based lending
Once considered the finance option of last resort, asset-based lending has become a popular choice for small businesses lacking the credit rating or track record to qualify for other forms of finance.[7] In simple terms, it involves borrowing against one of the company’s assets, with the lender focusing on the quality of the collateral rather than the credit rating and prospects of the company. A business may borrow against several different types of asset, including premises, plant, stock or receivables.
Main articles: invoice discounting and factoring (finance)
In recent years, it has become increasingly difficult for SMEs to obtain traditional finance from banks. Alternative options are invoice discounting or factoring, whereby the company borrows against its outstanding invoices, with the ability to obtain funds as soon as new invoices are created. It is often questioned which option is best for your business – factoring or discounting – and the answer depends on how the business wants to be perceived by customers.[citation needed] With factoring, the finance company charges interest on the loan until the invoice is paid, as well as fees, and the finance company takes ownership of the debtor ledger and uses its own credit control team to secure payment. With invoice discounting, the business maintains control of its own ledger and chases debts itself.
Smaller loans, usually for loan amounts of $100,000 USD or less, are referred to as “microloans.” Banks are less likely to make these loans than alternative lenders. When they do, the decision is usually based on the personal credit score of the business and/or the business credit score.[8]
There has been a rise in the number of online lenders offering small business loans. Online alternative lenders originated an estimated $12 billion in small business loans in 2014, with unsecured consumer loans representing $7 billion and small business loans accounting for approximately $5 billion.[8] Nonbank lenders that make small business loans have doubled their outstanding portfolio balance every year since 2000.[9] Some online originate loans from their own capital. Others may use a “marketplace” model, in which they match borrowers to loan products from a variety of lenders. Others use crowdfunding platforms that allow businesses to raise capital from a wide variety of sources.
Secured and unsecured business loans[edit]
Main articles: secured loan and unsecured debt
Business loans may be either secured or unsecured. With a secured loan, the borrower pledges an asset (such as plant, equipment, stock or vehicles) against the debt. If the debt is not repaid, the lender may claim the secured asset. Unsecured loans do not have collateral, though the lender will have a general claim on the borrower’s assets if repayment is not made. Should the borrower become bankrupt, unsecured creditors will usually realise a smaller proportion of their claims than secured creditors. As a consequence, secured loans will generally attract a lower rate of interest.
Lenders that make business loans often use a UCC filing to alert other creditors of their security interest in the property of the business. UCC filings may be placed against specific assets, or a blanket UCC filing secures interest in all property. UCC filings may affect the business credit score and may make it more difficult to obtain subsequent financing.[citation needed]
Personal guarantees[edit]
Many lenders require principals with 20% or greater ownership in the business to provide a personal guarantee. The personal guarantee allows the lender to attempt to collect the debt from the personal assets of the guarantors. Small business lenders may waive the personal guarantee requirement if the business has strong business credit scores and revenue.[citation needed] In May 2016, changes to the Member Business Lending rule by the National Credit Union Administration board further improved these loans, by allowing credit unions discretion in obtaining a personal guarantee from a borrower.[10]
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Jump up ^ "SBA website report" (PDF). SBA. March 31, 2017. Retrieved April 7, 2017.
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^ Jump up to: a b Brainard, Lael (September 30, 2015). "Community Banks, Small Business Credit and Online Lending". Federal Reserve. Retrieved April 7, 2017.
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Jump up ^ "Why Credit Unions Are a Favorite Funding Option for Small Businesses". AllBusiness.com. 2016-04-13. Retrieved 2017-04-10.
Corporate Debenture Government Municipal
Business loan Consumer lending Loan shark Payday loan Predatory lending Usury
Bankruptcy Consolidation Management plan Relief Restructuring Debt-snowball method Debtor-in-possession (DIP) financing Loan guarantee
Bad debt Charge-off Collection agency Compliance Debt bondage Debtors' prison Distraint Garnishment Phantom debt Strategic default Tax refund interception
Consumer Corporate Government Municipal Venture Buyer Deposit account Fixed income Money market Securitization
Consumer leverage ratio Debt levels and flows External / Internal / Odious debt
US peer-to-peer lending company, headquartered in San Francisco, California.[7] It was the first peer-to-peer lender to register its offerings as securities with the Securities and Exchange Commission (SEC), and to offer loan trading on a secondary market. Lending Club operates an online lending platform that enables borrowers to obtain a loan, and investors to purchase notes backed by payments made on loans. Lending Club is the world's largest peer-to-peer lending platform.[8] The company claims that $15.98 billion in loans had been originated through its platform up to 31 December 2015.[9]
Lending Club enables borrowers to create unsecured personal loans between $1,000 and $40,000. The standard loan period is three years. Investors can search and browse the loan listings on Lending Club website and select loans that they want to invest in based on the information supplied about the borrower, amount of loan, loan grade, and loan purpose. Investors make money from interest. Lending Club makes money by charging borrowers an origination fee and investors a service fee.
Lending Club also makes traditional direct to consumer loans, including automobile refinance transactions, through WebBank, an FDIC-insured, state-chartered industrial bank that is heaquarted in Salt Lake City Utah. The loans are not funded by investors but are assigned to other financial institutions.
The company raised $1 billion in what became the largest technology IPO of 2014 in the United States. Though viewed as a pioneer in the fintech industry and one of the largest such firms, Lending Club experienced problems in early 2016, with difficulties in attracting investors, a scandal over some of the firm's loans and concerns by the board over CEO Renaud Laplanche's disclosures leading to a large drop in its share price and Laplanche's resignation.
1.2 Initial Public Offering (IPO)
1.3 Car loans and mortgages
2.4 Loan performance statistics
Lending Club was initially launched on Facebook as one of Facebook's first applications.[10][11] After receiving $10.26 million in a Series A funding round in August 2007, from venture capital investors Norwest Venture Partners and Canaan Partners, Lending Club was developed into a full-scale peer-to-peer lending company.[10][12]
On April 8, 2008, Lending Club temporarily suspended new lender registration, canceled its affiliate program and entered a "quiet period" while it awaited approval to issue promissory notes to lenders.[13] On June 20, 2008, Lending Club filed an S-1 statement[14] with the U.S. Securities and Exchange Commission (SEC) seeking the registration of $600 million in "Member Payment Dependent Notes" to be issued on its Web site.[15] On August 1, 2008, Lending Club filed an amendment to its Form S-1[16] outlining new interest rate formulas as well as more details on a "resale trading system".[17] On October 14, 2008, Lending Club announced its completion of the SEC registration process, posted the filed prospectus on its website, and resumed new lender registration. Notes issued on or after October 14, 2008 represent Lending Club securities rather than direct obligations of the ultimate borrower and are tradable (can be bought and sold) on the Foliofn trading platform.[18] In March 2009, Lending Club raised $12 million in a Series B funding round led by Morgenthaler Ventures.[19]
In April 2010, the company raised $24.5 million in a Series C funding led by Foundation Capital and joined by existing investors including Morgenthaler Ventures, Norwest Venture Partners and Canaan Partners.[20]
In August 2011, Lending Club raised an additional $25 million in venture capital from Union Square Ventures and Thomvest, owned by the Thomson family of Thomson-Reuters.[1][21] This led to Lending Club earning a $275 million post-money valuation and an increase of $80 million in valuation from the preceding year.[22] Thomson-Reuters founder Peter J. Thomson also invested an unspecified amount of his personal fortune into Lending Club.[23] In fall 2011, Lending Club's headquarters moved to downtown San Francisco; its earlier offices were located in Sunnyvale and Redwood City.[1] Co-founder Soul Htite moved to China to start Dianrong.com, a peer-to-peer lending company based in Shanghai.[24]
In 2012, the company employed about 80 people, with Renaud Laplanche continuing as the company CEO and chairman of the Board of Directors.[1][25][26] The company averaged about $1.5 million in loan originations daily, with a total of $600 million since its founding.[27] In April 2012, Lending Club's SEC registration from 2008 was renewed for $1 billion USD in Member Payment Dependent Notes and became effective on April 10, 2012.[28] In June 2012, the company received $15 million in new funding from Kleiner Perkins Caufield & Byers and $2.5 million of personal investments from John J. Mack. Kleiner Perkins partner Mary Meeker joined Mack on Lending Club's board of directors.[3] This led to a $570 million valuation of the company.[29] In November 2012, Lending Club surpassed $1 billion in loans issued since inception and announced they were now cash flow positive.[30]
In May 2013, Google Capital purchased a stake in Lending Club.[29] Lending Club also began partnering with smaller banks in order to help streamline their small loans operations. In June 2013 the company partnered with Titan Bank in Texas and Congressional Bank in Maryland in order to help them facilitate loans that would have been otherwise unprofitable for them.[31][32]
Initial Public Offering (IPO)[edit]
In March 2014, Lending Club began providing loans to small businesses.[33] In April 2014 Lending Club acquired Springstone Financial.[34] In May 2014 Lending Club formed a partnership with Union Bank.[35] On August 27, 2014, Lending Club filed for an IPO with the SEC,[36] the offering taking place in December 2014.[37] On December 10, 2014, the company raised almost $900 million in the largest U.S. tech IPO of 2014. The stock ended the first trading day up 56%, valuing the company at $8.5bn.[38]
Stevenson Place, San Francisco, the location of Lending Club headquarters
Car loans and mortgages[edit]
Laplanche told Forbes in April 2015 that Lending Club would expand into car loans and mortgages.[39] Lending Club also announced a partnership with Google to extend credit to smaller companies that use Google's business services.[40] The company signed partnerships with Google, Alibaba.com, BancAlliance, and HomeAdvisor, including vetting community bank lenders for BancAlliance (a group of 200 banks), in order to send people on its platform to various community finance institutions.[41] That year Lending Club partnered with Opportunity Fund, announced by former President Bill Clinton at the Clinton Global Initiative. The partnership intended to provide $10 million to small businesses in areas of California that are underserved by lenders.[42] Lending Club and other small business lenders partnered with Sam’s Club to deliver its “business lending center” product.[43] In August 2015 the company created Lending Club Open Integration (LCOI).[44] In October, the company launched a multi-draw line of credit product for small businesses.[45]
Like other peer-to-peer lenders including Prosper, Sofi and Khutzpa.com, Lending Club experienced increasing difficulty attracting investors during early 2016. This led the firm to increase the interest rate it charges borrowers on three occasions during the first months of the year.[46] The increase in interest rates and concerns over the impact of the slowing United States economy caused a large drop in Lending Club's share price.[47]
In April 2016, a Lending Club employee reported to Laplanche that the dates on approximately $US 3 million in the firm's loans appeared to have been altered.[46] Lending Club's internal auditor engaged an outside firm to investigate the report.[48] This investigation found additional problems with loans, including that $US 22 million in loans which had been sold to the Jefferies investment bank did not in fact meet the bank's investment criteria. Lending Club bought these loans back from the bank and resold them.[46][49]
The New York Times reported that the investigation found that Laplanche had not disclosed to the board that he owned part of an investment fund which Lending Club was considering purchasing.[46] The Wall Street Journal also stated that Laplanche was found to have not fully disclosed what he knew about the problematic loans.[49]
On 6 May Lending Club's board made it clear to Laplanche that he no longer had their confidence, leading to his resignation on 9 May.[46] The Wall Street Journal reported that Laplanche had been fired by the board. Three of the firm's other managers had also been fired or had resigned by that time as a result of the problematic loans.[49] Lending Club's stock price fell by a further 34 percent after Laplanche's departure was announced.[46] This placed the stock price at 70 percent of the price at the time of the firm's initial public offering.[48] As a result of the incident, the Securities and Exchange Commission was reported to be investigating Lending Club's disclosures to investors.[49] From May 2015 until May 2016 the share price of Lending Club had decreased by over 60%. Since Laplanche's announced exit the share price cut in half again.[50]
Lending Club enables borrowers to create loan listings on its website by supplying details about themselves and the loans that they would like to request. All loans are unsecured personal loans and can be between $1,000 - $40,000. On the basis of the borrower’s credit score, credit history, desired loan amount and the borrower’s debt-to-income ratio, Lending Club determines whether the borrower is credit worthy and assigns to its approved loans a credit grade that determines payable interest rate and fees. The standard loan period is three years; a five-year period is available at a higher interest rate and additional fees. The loans can be repaid at any time without penalty.
Only investors in 39 US states are eligible to purchase notes on the Lending Club Platform.[51] However, eligibility differs when purchasing notes on the secondary market, FolioFN. Borrowers from all but 2 US states are eligible to apply for a loan.[51]
Investors can search and browse the loan listings on Lending Club website and select loans that they want to invest in based on the information supplied about the borrower, amount of loan, loan grade, and loan purpose. The loans can only be chosen at the interest rates assigned by Lending Club but investors can decide how much to fund each borrower, with the minimum investment of $25 per note.[52]
Investors make money from interest. Rates vary from 6.03% to 26.06%, depending on the credit grade assigned to the loan.[53] Lending Club makes money by charging borrowers an origination fee and investors a service fee. The size of the origination fee depends on the credit grade and ranges to be 1.1%-5.0% of the loan amount. The size of the service fee is 1% on all amounts the borrower pays.[54] The company facilitates interest rates that are better for lenders and borrowers than they would receive from most banks. It has averaged between a six and nine percent return to investors between its founding and 2013.[55] However, because lenders are making personal loans to individuals on the site, their gains are taxable as personal income instead of investment income. Therefore, income from Lending Club loans may be taxed at a higher rate than investments that are taxed at the capital gains rate.
After the notes are issued, Lending Club purchases the loans from the issuing bank and notes become the obligations of Lending Club, and not of the ultimate borrower: Lending Club promises to pay the noteholder monies it receives from the borrower less its service fees, while the holders of Lending Club notes have the status of unsecured creditors of Lending Club. This means that there is a risk that the investor may lose all or part of the investment if Lending Club becomes insolvent or declares bankruptcy, even if the ultimate borrower continues to pay.[26]
The investors have the ability to put notes up for sale before the notes have reached maturity. This service is offered in a partnership with FOLIOfn Investments which charges a 1% fee on note sales, making Lending Club the first peer-to-peer lending network to offer a secondary market for peer-to-peer loans. Other peer to peer lending networks such as Khutzpa.com have subsequently also partnered with FOLIOfn Investments to offer a secondary market.[56][57]
As of 2016, a high proportion of funds for Lending Club-facilitated loans came from hedge funds. During May of that year Lending Club was seeking to sell hundreds of millions of dollars worth of loans as bonds as part of a strategy to overcome difficulties in accessing sufficient funding.[58]
When initially founded, Lending Club positioned itself as a social networking service and set up opportunities for members to identify group affinities, based on a theory that borrowers would be less likely to default to lenders with whom they had affinities and social relationships. It developed an algorithm called LendingMatch for identifying common relationship factors such as geographic location, educational and professional background, and connectedness within a given social network.[59][60][61]
After registering with the SEC, Lending Club stopped presenting itself as a social network and maintaining that social affinity will necessarily reduce the defaulting risk. It now presents the algorithm just as a search tool for investors to find Notes they would like to purchase, using borrower and loan attributes such as the length of a loan term, target weighted average interest rate, borrower credit score, employment tenure, home ownership status, and others.[62] To reduce default risk, Lending Club focuses on high-credit-worthy borrowers, declining approximately 90% of the loan applications it received as of 2012[63] and assigning higher interest rates to riskier borrowers within its credit criteria.[27] Only borrowers with FICO score of 660 or higher can be approved for loans.[53]
The statistics on Lending Club's website state that, as of 31 December 2016, 62.3 percent of borrowers report using their loans to refinance other loans or pay credit card debt.[64]
Loan performance statistics[edit]
As of June 30, 2015, the average Lending Club borrower has a FICO score of 699, 17.7% debt-to-income ratio (excluding mortgage), 16.2 years of credit history, $73,945 of personal income and takes out an average loan of $14,553 that s/he uses for debt consolidation or for paying off credit card debts. The investors had funded $11,217,348,156 in loans, with $1,911,759,192 coming from Q2 2015. The nominal average interest rate is 14.08%, default rate 3.39%, and an average net annualized return (net of defaults and service fees) of 8.93%.[27][65] The average returns of investment for Lending Club lenders are between 5.47% and 10.22%, with 23 straight quarters of positive returns as of the second quarter of 2013.[66]
John Mack, senior advisor, Morgan Stanley[67]
Mary Meeker, partner, Kleiner Perkins Caufield & Byers[68]
Hans Morris, advisory director, General Atlantic, former president of Visa Inc[69]
Lawrence H. Summers, Professor, Harvard University[70][71]
Daniel T. Ciporin, general partner, Canaan Partners[70][72]
Jeff Crowe, managing partner, Norwest Venture Partners[70]
Rebecca Lynn, partner, Morgenthaler Ventures[70]
In 2011 and 2012 the company was named to as one of the AlwaysOn Global 250.[73][74] Lending Club is the winner of the World Economic Forum 2012 Technology Pioneer Award.[75] It has been recognized by Forbes as one of America’s 20 most promising companies in 2011[1] and 2012,[76] and by Fast Company as one of the ten most innovative financial companies in the world.[77] It was named one of the Disruptor 50 by CNBC in May 2013 and 2014, as a disruptive innovator in next generation financial services.[78][79] In 2014, Lending Club was recognized by Inc. as one of the 500 Fastest Growing Private Companies in America at #248.[80] Renaud Laplanche, the company’s founder and CEO, also received The Economist Innovation Award in 2014 for the consumer products category.[81]
Comparison of crowdfunding services
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^ Jump up to: a b c "Lending Club Statistics". Lending Club. Retrieved April 16, 2012.
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Jump up ^ Mark Calvey (June 20, 2013). "Community banks find a friend in Lending Club". San Francisco Business Times. Retrieved June 27, 2013.
Jump up ^ Lending Club CEO on Getting a Loan Without a Bank CNBC 14 March 2013; Accessed 16 March 2103
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Peter Renton, Renaud Laplanche (2012), The Lending Club Story ISBN 978-1-48113-173-5
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amount of money lent to an individual (usually on a nonsecured basis) for personal, family, or household purposes. Consumer loans are monitored by government regulatory agencies for their compliance with consumer protection regulations such as the Truth in Lending Act. Also called consumer credit or consumer lending.
Read more: http://www.businessdictionary.com/definition/consumer-loan.html
Consumer loan granted for personal (medical), family (education, vacation), or household (extension, repairs, purchase of air conditioner, computer, refrigerator, etc.) use, as opposed to business or commercial use. Such loans are either unsecured, or secured by the asset purchased or by a co-signor (guarantor). Unsecured loans (called signature loans) are advanced on the basis of the borrower's credit-history and ability to repay the loan from personal income. Repayment is usually through fixed amount installments over a fixed term. Also called consumer loan.
Read more: http://www.businessdictionary.com/definition/personal-loan.html
Text is available under the Creative Commons Attribution
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Business loan - Wikipedia
https://en.wikipedia.org/wiki/Business_loan
A business loan is a loan specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with added interest.
Types · Bank loan · SBA loans · Invoice finance
What is a small business loan?
How do you finance a business?
What does it mean to loan money?
How do you qualify for a business loan?
Small business financing - Wikipedia
https://en.wikipedia.org/wiki/Small_business_financing
Small business financing refers to the means by which an aspiring or current business owner obtains money to start a new small business, purchase an existing ...
Debt financing · Equity financing · Rollover retirement funds ...
Commercial and industrial loan - Wikipedia
https://en.wikipedia.org/wiki/Commercial_and_industrial_loan
A commercial and industrial loan (C&I loan) is a loan to a business rather than a loan to an individual consumer. These short-term loans may have an interest ...
Commercial mortgage - Wikipedia
https://en.wikipedia.org/wiki/Commercial_mortgage
Jump to Distinction between commercial and buy-to-let lending - Buy-to-let loans may be offered by both commercial and residential mortgage ...
https://en.wikipedia.org/wiki/SME_finance
Jump to The management of business lending - The effective management of lending to SMEs can contribute significantly to the overall growth and ...
Importance · Gap · Different Types of Lenders
https://en.wikipedia.org/wiki/Bridge_loan
A bridge loan is a type of short-term loan, typically taken out for a period of 2 weeks to 3 years ... A bridge loan is interim financing for an individual or business until permanent financing or the next stage of financing is obtained. Money from the ...
https://en.wikipedia.org/wiki/Loan
Jump to Commercial - Commercial[edit]. Main article: Business loan. Loans to businesses are similar to the above, but also include commercial mortgages ...
Participation loan - Wikipedia
https://en.wikipedia.org/wiki/Participation_loan
Participation loans are loans made by multiple lender to a single borrower. Several banks, for ... If alending institution isn't doing much business on its own, or is in a slow market, it can team up with a profitable “lead bank” in a healthier market ...
Merchant cash advance - Wikipedia
https://en.wikipedia.org/wiki/Merchant_cash_advance
A merchant cash advance was originally structured as a lump-sum payment to a business in exchange for an agreed-upon percentage of future credit card and/or debit card sales. The term is now commonly used to describe a variety of small business financing options characterized by short ...
https://en.wikipedia.org/wiki/Term_loan
A term loan is a monetary loan that is repaid in regular payments over a set period of time. ... Term loanscan be given on an individual basis, but are often used for small business loans. The ability to repay over a long period of time is attractive ...
Small Business Administration - Wikipedia
https://en.wikipedia.org/wiki/Small_Business_Administration
Jump to Disaster Loan Program - Before making a loan, the SBA must establish the cost of ... loanprogram mentioned above, small business owners ...
Asset-based lending - Wikipedia
https://en.wikipedia.org/wiki/Asset-based_lending
Asset-based lending is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. In this sense, a mortgage is an example of an asset-based loan. More commonly however, the phrase is used to describe lending to business ...
https://en.wikipedia.org/wiki/Secured_loan
A secured loan, is a loan in which the borrower pledges some asset as collateral for the loan, ... May 2008: Future Mortgages announce they will close for business. June 2008: Picture Financial cease to trade in the sector. July 2008: Barclays ...
Loan origination - Wikipedia
https://en.wikipedia.org/wiki/Loan_origination
Loan origination is the process by which a borrower applies for a new loan, and a lender ... The businessmodel of the individual financial institution and the products they offer therefore affect the decision of which application model they will ...
Unsecured debt - Wikipedia
https://en.wikipedia.org/wiki/Unsecured_debt
In finance, unsecured debt refers to any type of debt or general obligation that is not protected by a guarantor, or collateralized by a lien on specific assets of the ...
Collateral (finance) - Wikipedia
https://en.wikipedia.org/wiki/Collateral_(finance)
In lending agreements, collateral is a borrower's pledge of specific property to a lender, ... A pawnbroker is a common example of a business that may accept a wide range of items as collateral. The type of the collateral may be restricted based ...
Commercial bank - Wikipedia
https://en.wikipedia.org/wiki/Commercial_bank
Jump to Unsecured loan - There are small business unsecured loans such as credit cards and credit lines to large corporate credit line . These may be ...
Non-conforming loan - Wikipedia
https://en.wikipedia.org/wiki/Non-conforming_loan
A non-conforming loan is a loan that fails to meet bank criteria for funding. Reasons include the ...Commercial non-conforming loans are also known as hard money loans, and comprise a large portion of all non-conforming loans. They are ...
Peer-to-peer lending - Wikipedia
https://en.wikipedia.org/wiki/Peer-to-peer_lending
Peer-to-peer lending, sometimes abbreviated P2P lending, is the practice of lending money to individuals or businesses through online services that match ...
Installment loan - Wikipedia
https://en.wikipedia.org/wiki/Installment_loan
An installment loan is a loan that is repaid over time with a set number of scheduled payments; normally at least two payments are made towards the loan.
Loan agreement - Wikipedia
https://en.wikipedia.org/wiki/Loan_agreement
A loan agreement is a contract between a borrower and a lender which regulates the mutual ... Forcommercial banks and large finance companies, "loan agreements" are usually not categorized although "loan portfolios" are often broadly ...
https://en.wikipedia.org/wiki/Loan_shark
A loan shark is a person or body who offers loans at extremely high interest rates usually .... In the beginning, underworld loansharking was a small loan business, catering to the same populations served by the salary lenders and buyers.
https://en.wikipedia.org/wiki/Payday_loan
A payday loan is a small, short-term unsecured loan, "regardless of whether repayment of loans ..... Proponents of minimal regulations for payday loan businesses argue that some individuals that require the use of payday loans have already ...
https://en.wikipedia.org/wiki/Interest
Interest is payment from a borrower or deposit-taking financial institution to a lender or .... By applying an opportunity cost argument, comparing the loan rate with the rate ..... It is increasingly recognized that during the business cycle, interest rates and .... The last equation allows us to define a constant that is the same for both ...
Savings and loan association - Wikipedia
https://en.wikipedia.org/wiki/Savings_and_loan_association
A savings and loan association (S&L), or thrift institution, is a financial institution that ... By law, thrifts can have no more than 20 percent of their lending in commercial loans — their focus on mortgage and consumer loans makes them ...
Home equity loan - Wikipedia
https://en.wikipedia.org/wiki/Home_equity_loan
A home equity loan is a type of loan in which the borrower uses the equity of his or her home as ... External links[edit]. Putting Your Home on the Loan Line is a Risky Business - from FDIC ...
https://en.wikipedia.org/wiki/Kabbage
Kabbage, Inc. is an online financial technology company based in Atlanta, Georgia. The company provides funding directly to small businesses and consumers through an automated lending platform.
Stated income loan - Wikipedia
https://en.wikipedia.org/wiki/Stated_income_loan
A stated income loan is a mortgage where the lender does not verify the borrower's income by ... The same issue can arise with self-employed borrowers, where the bank with a fully documented loan would include the borrower's business debt ...
Hard money loan - Wikipedia
https://en.wikipedia.org/wiki/Hard_money_loan
A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential ...
Interest-only loan - Wikipedia
https://en.wikipedia.org/wiki/Interest-only_loan
An interest-only loan is a loan in which, for a set term, the borrower pays only the interest on the principal balance, with the principal balance unchanged. At the ...
Commercial Loan - Investopedia
www.investopedia.com/terms/c/commercial-loan.asp
A debt-based funding arrangement that a business can set up with a financial institution. The proceeds of commercial loans may be used to fund large capital ...
What is personal loan? - Business Dictionary
www.businessdictionary.com/definition/personal-loan.html
use, as opposed to business or commercial use. Such loans are either unsecured, or secured by the asset purchased or by a co-signor (guarantor). Unsecured ...
What is a Personal Loan? | LendingTree Glossary
https://www.lendingtree.com/glossary/what-is-personal-loan
A personal loan has higher interest rates than secured loans like a home-equity loan, but you are not required to put up any collateral to ensure repayment.
Short-Term Loans - Entrepreneur
https://www.entrepreneur.com/encyclopedia/short-term-loans
A loan scheduled to be repaid in less than a year - Small Business Encyclopedia.
Cloud Lending Solutions | Lending & Leasing Software on Salesforce
https://www.cloudlendinginc.com/
Cloud Lending Solutions digitizes origination, underwriting, servicing and ... Advanced collections solution that enable lenders to define and automate loan ... Configurable borrower portal for consumer,commercial and small business loans.
Long-Term Loans - Boundless
https://www.boundless.com › ... › Financial Management › Long-Term Financing
Three common examples of long term loans are government debt, mortgages, and ... BusinessTextbooks Boundless Business Financial Management Long-Term Financing ... subject to local regulations and legal requirements, define most mortgages: .... http://en.wikipedia.org/wiki/DebentureWikipedia CC BY-SA 3.0.
Get help and support for your business - GOV.UK
https://www.gov.uk/business-support-helpline
Get business support and advice over the phone and online - setting up and running a business.
Mezzanine Debt: What It Is and How It Works -- With Examples -- The ...
https://www.fool.com/investing/.../mezzanine-debt-what-it-is-and-how-it-works.aspx
May 22, 2015 - Mezzanine debt takes up some of the financing that an equity ... We know the businessproduces $200,000 in operating income per year.
Automated Financial Systems, Inc. (AFS) | LinkedIn
https://www.linkedin.com/company/automated-financial-systems-inc-afs
AFS provides the industry's only fully integrated commercial lending system ... the complex business as well as regulatory and compliance issues that define the ...
What Is a Correspondent Lender? - Mortgage Professor
https://www.mtgprofessor.com/...%20Type%20of%20Loan%20Provider/what_is_a_c...
Sep 4, 2006 - Lenders and brokers both perform a variety of loan origination tasks, which include ... If wedefine "lender" as the entity who disburses funds to the ... Consider a broker who develops significantbusiness volume, has earned ...
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SWIFT – The global provider of secure financial messaging services
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Definition of Business Loans | Chron.com
smallbusiness.chron.com › Money & Debt › Business Loans
Businesses require an adequate amount of capital to fund startup expenses or pay for expansions. As such, companies take out business loans to gain the ...
7(a) Loan Program | The U.S. Small Business Administration | SBA.gov
https://www.sba.gov/loans-grants/see-what...loan.../general-small-business-loans-7a
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