Priorities & Concerns
Small businesses face numerous challenges and take on significant risks to succeed; traditional bank financing cannot meet the needs of the marketplace
The lack of traditional bank financing left a gap open in credit availability for small business; Revenue Based Finance Coalition (RBFC) member companies are trying to close the gap and help spur entrepreneurship so more Americans can own and operate their own businesses
Increased Regulation is Unnecessary: Regulation is a Solution in Search of a Problem
The industry is committed to a set of principles that promote transparency, fairness, strong risk management and security
The CFPB should not expand its role into the small business finance industry beyond its statutory data collection requirement under Section 1071 of the Dodd Frank Act
The RBFC is concerned the CFPB will expand its limited authority over non-bank small business finance to stifle marketplace and fin-tech finance companies
Revenue Based Finance (RBF) Transactions Are Not Loans
The Revenue Based Finance (RBF) transaction is a factoring product, not a loan
RBF is a factoring product in which our members purchase future receivables in exchange for funds
It is impossible to subject a factoring transaction to TILA or provide an APR disclosure since the finance company does not know when the receivables will be acquired in full – it could be one month, six months, years or not at all
RBF products allow small businesses the flexibility to handle volatile markets and still get the financing they need to succeed
Restricting Second Position Finance Products Will Harm Small Businesses
Some lenders are trying to restrict second position commercial financing through the courts
The RBFC supports second position financing
Second position financing occurs when some small businesses need additional liquidity to help them with seasonal inventory surge, a renovation or a major equipment failure
The second position financing essentially takes a subordinate position to the small business’s primary lender much like a HELOC and a primary mortgage
The RBFC believes that merchants should have the ability to shop the marketplace to finance such activities