Regulators Aim At Online Small Business Loans

The industry of online small business loans has found itself in the crosshairs of major financial regulators following the influx of major banks moving into the industry. Online lending regulations have not been focused on as heavily until recently, and the outcome remains to be seen. Fast and Easy Funds, an online lender, is confident that if other lenders follow the rules and obey the law, there is nothing to worry about.

Currently, online lending regulations are tied closely to individual and consumer loans, and the difference is not clear. Financial regulators are said to have begun attempting to find a clearer definition.

An article in the Wall Street Journal explores online lending regulations and the financial sector’s sudden interest in further regulation of the industry. The reason for the sudden interest is of course the fact that major banks have entered the industry, and online small business loans have increased by 60% since 2014.

Interestingly, the reason online small business loans have been such a great source of capital for many businesses is because online lenders were able to take risks on companies in the first place. Big banks remained apprehensive when awarding loans to businesses without high credit scores or solid credit histories, and that may have been because of large scale regulation.

The initial goal for online small business loans is greater transparency and comparison of rates. These are regulations most can get behind and will likely be in effect rather soon.