The question that is perplexing loan regulators and business owners as of late is: are online lenders banks? More importantly, are they shadow banks? Are they considered to be institutions that have the same power as a bank but without the same responsibilities?
The difference between a bank and an online lender is simple: online lenders are not tethered by certain restrictions and they are also not covered in case of emergency (think bail outs and tax exemptions).
Another difference between traditional banks and online lenders is how they evaluate risk. There are far more requirements for small businesses to even be considered for a loan through a bank, whereas online lenders cut down on costs and can factor in more risk when awarding loans to business owners.
The Online Lenders Alliance has began using its clout to bring together alternative lenders to agree on a certain set of rules for online lenders. As the federal government begins taking online lenders more seriously, lenders like Fast and Easy Funds know that it is up to them to show their good faith so that they are not weeded out with the bad lenders surfacing online.
Alternative lenders have been able to provide American businesses with loans precisely because they are not banks. Traditional lenders have become a bureaucracy that created online lenders in order to bring the small business owner back to the forefront of American industry, and recreate the American Dream.