Priorities & Concerns
- Small businesses face numerous challenges and take on significant risks to succeed; traditional bank financing has not met the needs of the marketplace.
- The lack of traditional bank financing left a gap open in credit availability for small business; Revenue Based Finance Coalition (RBFC) member companies are working to close the gap and help spur entrepreneurship so more Americans can own and operate their own businesses.
The RBFC is Committed to Thoughtful and Deliberate Regulation
- The industry is committed to a set of principles that promote transparency, fairness, strong risk management and security.
- The RBFC is concerned the CFPB will expand its limited authority over non-bank small business finance to stifle marketplace and fin-tech finance companies.
Revenue Based Finance (RBF) Transactions Are Not Loans or a Form of Credit
- The Revenue Based Finance (RBF) transaction is a factoring product, not a loan or a form of credit.
- RBF is a factoring product in which our members purchase future receivables in exchange for funds.
- It is impossible to subject a factoring transaction to TILA or provide an accurate APR disclosure since the finance company does not know when the receivables will be remitted in full – it could be one month, six months, years or not at all.
- RBF products allow small businesses the flexibility to handle various challenges and still get the financing they need to succeed.
Restricting Second Position Finance Products Will Harm Small Businesses
- Some finance companies are trying to restrict second position commercial financing through the courts.
- The RBFC supports second position financing.
- Second position financing occurs when some small businesses need additional liquidity to help them with seasonal inventory surge, a renovation or a major equipment failure.
- The second position financing essentially takes a subordinate position to the small business’s primary lender much like a HELOC and a primary mortgage.
- The RBFC believes that merchants should have the ability to shop the marketplace to finance such activities.