Fintech Lenders To Make Streamline Change
A recent article in The Australian Financial Review Fintech Lenders to Adopt Code of Conduct brought to light transparency concerns within Fintech lenders and the reparations small business can face at the fault of lengthy “less than adequate” terms and conditions.
With this issue raising awareness, positive changes are being made within the Fintech Lending sector to come together and self-regulate, in turn, increasing customer satisfaction and proving they are a powerful force when seeking an alternative to the rigid structure of corporate banks.
Undoubtedly, there are advantages to using Fintech Lenders with most operating on a 24-48-hour funding time, requiring minimal supporting documents and offering fixed term, unsecured loans.
An easier and quicker option for financing has its appeal to provide small businesses the start-up needed to succeed. With that being said, it is vital to assess your situation critically before jumping to sign the dotted line. Our team at NVFG does just that, ensuring the complex details are simple to digest and that your best interest are at forefront of everything we do.
Understanding the terms as well as potential hardships that can arise from not being able to make repayments is essential.
Below we’ve presented a scenario and tips to consider within the broad terminology:
Common terms used interchangeably are: Interest Factor Rate, Factor Rate and Risk Fee. All three mean the same thing and are charged by most lenders.
So, what do they mean?
To further explain, we’re presented an example of how Interest Factor Rate / Factor Rate / Risk Fee are used:
Essentially, for every dollar lent, a return is expected
i.e. if the lender charges an Interest Factor Rate of 1.35 on $100,000 loan
the total payback will be $135,000 (1.35 x $100,000)
over 12 months the weekly repayments will be $2,596
Can your business afford and sustain this?
- Keep in mind that if you payout early, you will likely have to repay the full amount.
- Most Fin Tech lenders say that they adopt a pricing model which is risk-based on several variables to determine their Interest Factor Rate / Factor Rate / Risk Fee etc.
- Ensure that you read the terms and conditions carefully as hidden fees which contribute to the overall cost can often be concealed within the fine print.
This example highlights why Fintech Lenders such as: Banjo, Bigstone, Beyond, Merchant Capital, Get Capital, Moula, Ondeck, Prospa, RateSetter, Sail Business Loans, Skipper, Spotcap and TruePillars are coming together to self-regulate. By creating a glossary of common lending code of conduct, standardised interest rate and fee disclosures, they are creating an honest and transparent lending for the client.
The underlying concept with these loans is that it allows businesses to seize opportunities to grow or expand their business. It’s the age of saying “you need money to make money” as we believe these lenders allow small business to obtain capital where traditional banks would have usually not even considered them.
We believe this move to self – regulate will allow the industry to further ensure clients understand the obligations of their loan and gain a more streamlined approach to the practice of the tech savvy and unfamiliar terminology used.
Our experienced brokers at NV Finance Group have over a decade of experience in this specialised area. NVFG acts as the liaison between the client and Fintech Lenders to simplify the process, ensuring your needs are taken care of and repayments are feasible long term. We work diligently and tirelessly on your behalf for optimal results. Contact us today to discuss what option is right for your financing needs.
To read to full article from the Australian Financial Review follow the link: http://www.afr.com/technology/fintech-business-lenders-to-selfregulate-20180227-h0wpu3
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