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Alternative lenders have offered Americans a viable loan option since the Great Recession and associated legislative regulation put a strangle-hold on traditional business lending. The number of alternative lenders has grown exponentially in the past several years, making online loans and alternative financing easier than ever to obtain. And yet there have been some major concerns about this segment of the loan market.

There have certainly been many horror stories reported about astronomical interest rates, hidden fees and predatory lending practices among some of the alternative lender crowd. In order to combat that image, several of the largest alternative lenders – Funding Circle, Lending Club and Prosper Marketplace – have formed the Marketplace Lending Association. According to its website, the aim of the association is to promote ‘a transparent, efficient and customer-friendly financial system’ by supporting the responsible growth of marketplace lending, fostering innovation in financial technology and encouraging sound public policy.

Any online, alternative lender will be allowed to join the association provided they meet the certain standards. These include having been in business for at least one year, having at least $1 million in revenue and being able to match at least 75 percent of loans ‘by dollar, with commitments for funding from investors, before the loans are issued.’ They must also promise to adhere to higher transparency standards when it comes to fees and interest rates. The Association also encourages members to eliminate any predatory lending practices and only make loans when they are confident the borrower can repay them.

“Marketplace lending platforms have a unique opportunity to make credit more affordable for consumers and more available to small business owners, while offering attractive investment opportunities to retail and institutional investors,” Lending Club founder and chief executive Renaud Laplanche said in a statement. “This opportunity will only materialize if our technology and business model advantage is coupled with sound business practices that enable responsible lending products, consumer friendly and transparent terms, and relentless focus on compliance, security, and risk management.”

Hopefully the new association will hold true to its tenants and help borrowers find a safer home in alternative lending.


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AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources