Priorities & Concerns
At RBFC, we advocate for policies that promote access to the revenue-based financing product and industry as a whole. The advocacy work RBFC does benefits the entire industry from funders to brokers and vendors. We advocate for the availability of more options for businesses that need flexible financing as well as for policies that promote continued access to the revenue-based financing product and the health of the overall industry.
Below are some of our policy priorities and concerns:
RBFC funder companies are helping to close the credit gap and help small businesses receive flexible financing options.
Small businesses face numerous challenges and take on significant risks to succeed; traditional bank financing cannot meet the needs of the marketplace. The lack of available bank financing leaves an open gap in the credit availability for small to medium-sized businesses.
Revenue Based Financing (RBF) transactions are not loans.
The revenue-based financing (RBF) transaction is a purchase of future receivables, similar to a factoring transaction. There is no compounding interest or repayment due date. The product is not a loan.
Requiring providers of RBF to calculate and disclose APR in a standard agreement is not appropriate for the RBF product.
APR disclosure requires knowing when the receivables will be acquired in full – it could be one month, six months, or longer depending on the revenue generated by the business.
Without compounding interest rates, the cost of capital remains the same no matter how long the agreement may run between a funder and a business.
APR or “Annual Percentage Rate” is an appropriate disclosure metric for consumer lending products such as credit cards or mortgages that accrue interest year to year and have a set repayment period. It is not a useful metric to determine or compare costs on products where the cost of the financing is fixed with no set repayment period.
Total Cost of Capital (“TCC”) is the industry standard for disclosures that let’s businesses understand exactly how much they will repay the funder over the entire duration of the agreement. RBFC actively advocates for the implementation of TCC regimes at the federal and state level. The TCC disclosure regime is highlighted below:
Total Amount of Funds Provided: The total amount of funds provided to the business under the terms of the financing.
Total Amount of Funds Disbursed: The total amount of funds disbursed to the business if less than the Total Amount of Funds Provided.
Total of Payments: The total amount the business will pay.
Total Dollar Cost of Financing: The total dollar cost of the financing.
Payments: The manner, frequency, and amount of each payment.
Prepayment: A statement of whether there are any costs or discounts associated with prepayment.
RBFC promotes responsible regulation and compliance in the industry.
The industry is committed to a set of principles that promote transparency, fairness, strong risk management and security.
RBFC monitors regulations at the state and federal level, such as the CFPB’s 1071 Small Business Data Collection Rule, to help member companies stay compliant and current on recent updates and developments.
RBFC advocates for policies that will facilitate keeping more financing options available to small businesses, not less.
RBFC member companies have the opportunity to meet directly with state and federal policymakers as well as participate in the legislative process through our elite government affairs teams.