A technology company which helps small businesses gain access to funding is refusing to work with lenders who use predatory loan terms as it calls for more transparency.
Lending Express works with around 100,000 small and medium businesses, securing finance with 40 lenders.
The group helps to connect SMEs with lenders and get them access to finance across both Australia and the United States.
Founder and CEO Eden Amirav said he had seen a lot of bad practice among lenders who did not explain their terms properly, but that things seemed to be changing.
He said, “In the past, lenders would be able to do whatever they want, sign businesses on whatever terms they wanted.
“Small businesses are looking for funding, a lot of the time they don’t know what their options are and they will just go with whoever is willing to give them money without reading the small print and without actually knowing what they’re signing.
“I think now everybody is starting to understand that you need better transparency and favouring the SME ecosystem.”
Amirav said that Lending Express has now decided to no longer work with banks unless they are committed to supporting SMEs with more transparent terms. This includes working with the fintech lenders who have signed the Australian Finance Industry Association (AFIA) Online Small Business Code of Lending Practice.
He said he is also refusing to work with lenders in the US which use confessions of judgement (COJs). Lenders will put this legal term into their loan contracts, putting borrowers at risk of lenders taking them to court with no warning or explanation to reclaim all the money.
Instead, he is working to “match” small businesses with the right lender for them, ensuring they understand all the loan terms properly.
When the business is unable to get funded, the company has a platform called Lending Score which guides the business to a position where they can be.
“We started by doing great matching between businesses and lenders and really improving their funding odds,” he added.
“What we quickly understood was that even though we’re helping those businesses, the majority of them trying for funding were not getting a loan from anybody.
“Nobody in the whole market was willing to fund them and a lot of times these businesses were really too risky to fund at that time, but a big part of them were actually great businesses that were simply being overlooked by very narrow parameters.
“Like you saw that some of the lenders were just saying this is a good business or bad business without actually looking at the exact reason.
“At that point we understood that sometimes you could guide the business through very simple actions he could take on the business to improve to get him to a point where there will be a lender that are willing to fund his business and help him to grow it.”