New association of direct lending platforms sets founding principles and membership criteria.
The Association of Alternative Business Finance (AABF), a proposed addition to the alternative lending sector, is rumoured to be nearing launch. Its seven founding members are all direct lending platforms for small businesses, which write loans off their own balance sheet. While the association is said to be open to allowing peer-to-peer lenders to join, there are currently none among the founding cast. These are: The Just Loans Group PLC, Liberis, Credit4, YesGrowth, Catalyst Finance, Capify UK and Fleximize.
In the UK, these platforms operate within something of an association vacuum. The alternative finance sector’s best-known industry bodies are the P2PFA and the UKCFA, but both of these are geared towards representing companies which use an online marketplace to fund deals (whether debt, equity or rewards based).
The emergence of the AABF somewhat mirrors developments stateside, where The Small Business Finance Association and the Innovative Lending Platform Association represent a diverse range of alternative lenders which do not conform to the requirements of the Marketplace Lending Asscociation.
In addition to having to meet various transparency, operational and credit related standards, members of the AABF must specialise in one of the following product types: business cash advance (sometimes known as merchant cash advance), term lending including corporate bond issue, invoice funding/discounting, lines of credit including revolving credit facilities, trade finance, bridging, asset finance or peer-to-peer lending.
The inclusion of peer-to-peer looks to be something of an outlier, given that it sits within a long list of products (rather than funding mechanisms), but we understand that it is intended to reflect the association’s openness to peer-to-peer lenders joining.
The association’s principles, broadly speaking, are transparency, responsibility, fairness and security. The business lending sector is not regulated anywhere near as strictly as its consumer counterpart, and the association has been talked about by members as a means of safeguarding the interests of customers.
Fee/cost disclosure is front and centre among the transparency related requirements. There is an ongoing debate in the UK’s alternative business lending sector about the appropriateness of mandating the usage of APRs for short term lenders.
A key initiative for the AABF is to create a centralised database for fraudulent applicants and personal guarantees, in order to limit the ability of borrowers to take out a loan from multiple vendors at the same time.
There is no clear launch date at present, but we understand that the association expects to launch in the first quarter of the year.
Now in its sixth year, the AltFi London Summit returns on 18th March 2019 to 155 Bishopsgate. Last year proved to be a crucial turning point for the key players building the future of finance. Leading platforms launched oversubscribed IPOs, digital banks proliferated and mainstream financial institutions started their own disruptive propositions. With 2019 certain to be another landmark year, more questions will be asked by regulators with investor interest in disruption also poised for more rapid growth.