STATEMENT: Responsible Business Lending Coalition Applauds Introduction of Small Business Financing Disclosure Act of 2023

For immediate release: June 16, 2023
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CONTACT:
Lisa Marlow | Media Relations Manager
(202) 535-3229 | lmarlow@smallbusinessmajority.org

Washington, D.C., June 16, 2023 — Statement in support of the Small Business Financing Disclosure Act of 2023 by Lauren Rosenbaum, Staff for the Responsible Business Lending Coalition, on behalf of the Coalition

The Responsible Business Lending Coalition (RBLC) — the leading cross-sector small business financing coalition—applauds the introduction of the Small Business Financing Disclosure Act of 2023 (S. 2021 / H.R. 4192).

Every entrepreneur deserves access to responsible, affordable capital that will help their business thrive, not force them out of business. Because of loopholes in current laws, some financing providers are misleading business owners to take on harmful debt that devastates their finances and threatens their livelihoods. This law will ensure that small businesses seeking capital have access to clear, honest information about pricing so they can compare financial products and choose the best option for their business.  

This legislation is needed because today, the federal Truth in Lending Act ensures transparency in consumer lending but does not apply to small business financing. In the absence of policy action, financing providers have introduced a range of confusing and misleading terms that can hide the true cost of financing for small businesses. This lack of transparency makes it impossible for small business owners to compare their financing options effectively, resulting in them taking on debt with annual percentage rates (APRs) as high as 358%, without this information ever being disclosed to them. Selecting an unaffordable financial product could be the difference between success and failure for existing businesses and for entrepreneurs just starting out. 

No matter where they’re looking for capital, business owners deserve access to the same information so they can compare financial products and choose the best option for their business. APR is a time-tested rate that people know and expect because it is the legally required standard for consumer products such as mortgages, auto loans, credit cards, and short-term personal loans. We strongly support the Small Business Financing Disclosure Act because it will ensure business owners can see the APR, among other important metrics, for any business financing option. 

This legislation will support a healthy business financing market by rewarding finance providers for offering the most innovative and affordable products, rather than devising the most misleading pricing information. This will benefit all entrepreneurs seeking capital, particularly entrepreneurs of color who are disproportionately burdened by high-cost business debt, according to a recent Federal Reserve study.  

The Responsible Business Lending Coalition, and more than 80 local, state, and national business organizations and stakeholders, urges lawmakers from both sides of the aisle to pass this historic legislation in support of our nation’s innovators and job creators who power growth and vitality in their communities and strengthen our national economy.


RBLC Member Endorsement Quotes

Accion Opportunity Fund
“Small business owners are the backbone of the economy and deserve fair and transparent financing. For far too long, people of color and women have been shut out of the traditional financial system becoming frequent targets by predatory lenders. I am pleased with the introduction of the Small Business Financing Disclosure Act of 2023 that will promote the disclosure of total cost of credit so that business owners understand the terms of the credit they are accessing.”  — Luz Urrutia, CEO of Accion Opportunity Fund

Aspen Institute
“It is vital that small businesses who are seeking financing have the information to fully understand the cost and terms of each offer, and to easily compare across products, so they can make the best choice for their business. APR is the only metric that enables apples-to-apples comparisons among products with different fees, interest rates, and term lengths over a common unit of time. Lack of transparency is currently inhibiting competition and innovation in the financing markets. Today, without transparent disclosure and the ability to compare costs, financing companies do not have a strong incentive to lower prices but compete instead on the speed or ease of accessing financing. As a result, small business financing prices remain high. This reduces the ability of business owners to reinvest in the growth and health of their businesses, support their workers, or the profits of their business to support and invest in their families and communities.” — Joyce Klein, Senior Director, Business Ownership Initiative, The Aspen Institute

Camino Financial
“Financial inclusion requires transparency. Underserved Black and Latino communities need fair and transparent terms to make well informed decisions and grow generational wealth. The Small Business Financing Disclosure Act of 2023 is an important step forward to increase financial inclusion.  — Sean Salas, CEO and Co-Founder of Camino Financial” 

Community Investment Management
“Small businesses deserve common sense transparency in evaluating financing options so they can make well-informed financial decisions and play a key role in rebuilding our economy--and this bill delivers that. In the face of our current economic crisis, entrepreneurs desperate to keep their doors open are vulnerable to predatory lenders at the worst possible time. We all have a stake in the financial health of our small business community and should rally around national legislation to protect their basic rights to responsible and transparent financing.” — Jacob Haar, Managing Partner of Community Investment Management

Funding Circle
“We believe a free and fair market operates most efficiently when there is transparency in pricing, terms and conditions. When a small business has all of the necessary information up front including the annual percentage rate (APR), they can comparison shop and make informed decisions that are best for their business. Funding Circle supports one national uniform small business financing disclosure law because it is in the best interests of small businesses and interstate commerce.” — Ryan Metcalf, Head of U.S. Public Affairs at Funding Circle U.S.

LendingClub
“Commonsense transparency standards promote innovation by enabling small businesses to comparison shop. This groundbreaking bill will create healthy competition, which enables lower  prices for small businesses and supports responsible lending.” — Armen Meyer, Head of Public Policy, LendingClub

National Association of Latino Community Asset Builders (NALCAB)
“There are more than 4.37 million businesses owned by Hispanics in the United States, contributing around $700 billion per year to the national economy. Despite this, Latino business owners are frequent targets of unfair small business lending practices. NALCAB applauds Senator Menendez and Ranking Member Velazquez for introducing legislation that will give entrepreneurs the transparency needed to make informed financial decisions.” Marla Bilonick, President and CEO, NALCAB 

Opportunity Finance Network 
“At a time when many small business owners need capital to stabilize their businesses, this legislation is critical to helping small businesses access affordable, responsible financing and avoid high-cost predatory loan products. Requiring lenders to disclose key information including the annual percentage rate (APR) ensures entrepreneurs have the knowledge they need to make financial decisions that grow and strengthen their business.” — Dafina Williams, Executive Vice President, External Affairs, Opportunity Finance Network

Small Business Majority
“Unregulated, predatory lenders come with the promise of fast cash for small businesses; however, these lenders often use bait and switch tactics that can send a business into financial ruin. For years predatory lenders have been able to skirt transparency and trick small business owners into repaying a loan at exorbitant rates. As small businesses recover from myriad challenges stemming from the pandemic, we cannot allow them to be taken advantage of any longer. We commend Senator Menendez and Congresswoman Velázquez for leading this charge in Congress and urge all Members to join them in providing America’s entrepreneurs with the financial transparency they rightly deserve.” — John Arensmeyer, Founder and CEO of Small Business Majority

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About the Responsible Business Lending Coalition
​The Responsible Business Lending Coalition (RBLC) is the leading cross-sector voice on small business financial protection. The coalition includes nonprofit and for-profit CDFIs, fintechs, investors, and small business advocates that share a commitment to innovation in small business lending and serious concerns about the rise of irresponsible small business lending. The coalition created the Small Business Borrowers' Bill of Rights, the first cross-sector consensus on the rights that small business owners deserve and what financing providers, brokers and lead generators can do to uphold those rights. Over 110 small business lenders, brokers and lead generators, and advocacy organizations have endorsed these standards. Members of the Responsible Business Lending Coalition include Accion Opportunity Fund, Community Investment Management, Funding Circle, LendingClub, Opportunity Finance Network, Small Business Majority, and the Aspen Institute. For more information, visit www.borrowersbillofrights.org.