Digital lending apps have grown over the past two years.

However, over the past couple of months, the apps have been accused of numerous flaws, including blatant violation of personal information, harassment, and loans with exorbitant interest rates.

In Kenya, for example, apps have come under scrutiny following mass reports that they are using illegal means to collect loans, such as harassing customers and using their personal information to humiliate them in the purpose of forcing them to pay.

The issue was raised in parliament, and lawmakers began crafting legislation that would completely tame the space.

In 2021, the CBK Amendment Bill was enacted. The bill required the CBK to issue regulations on lending applications by March 23, 2022. The regulations cover aspects of licensing, governance, and credit operations of online lenders.

It also means that in a few days the law will be enforceable. This will imply that the business providing loans online will need to have appropriate policies, procedures and systems in place to ensure confidentiality of customer information and transactions.

There are other regulations on loan collections, including a case where the law cites that agents must not use threats or obscene language when talking to their clients.

In Nigeria, such developments have not been realized. However, the country’s federal government has since freed up its powers to police some lending apps that violated customer privacy.

The apps are:

• Okash
• GoCash
• EasyCredit
• KashKash
• Easy monitoring
• Quick pick
• Sokoloan

The Kenyan case will be interesting to see as there are dozens, probably more loan apps that have infiltrated the space. The apps have been successful in their business, albeit illegal in some cases, thanks to M-PESA which allows them to send money immediately to a lent wallet.

It would not be surprising to see some of them closing up shop given that the regulations are very strict, and would not see them surviving in the market.

The Economic Crimes Wing of the Central Crime Branch Police uncovered another mobile loan app scam on Thursday where senior managers allegedly used their employees’ details to start another business. The defendants started a company by appointing some of their employees as directors and opened bank accounts in their names to launder money, a police officer said. This was done without their knowledge.

Two directors of the company and the director have been booked so far.

The scam began to unravel when a marketing manager employed by the defendant received a tip from a bank regarding an account opened in his name. Upon closer inspection, she found records of financial transactions worth thousands of dollars made from that account. She approached the CCB who conducted a detailed investigation.

Police say the defendants – Shabbir Alam and Umakanth Yadav – are directors of a private company offering online loans through apps. “When the marketing manager joined the company in July 2021, they used her documents and other information to open accounts in two private banks without her knowledge. They also started another company and registered her as a director said a senior police officer.

The accused offered app users instant loans at exorbitant interest rates and threatened, intimidated and harassed those who failed to pay. “The bank accounts opened in the employee’s name were used to receive EMI loans and interest, which amounted to hundreds of thousands of rupees,” the officer said.

Police have filed a complaint against the two directors and another member of senior management charging them under various sections of the Karnataka Money Lenders Act, Information Technology Act and the law on prohibition of charging exorbitant interest in Karnataka.

Small businesses are the backbone of Southeast Asia’s economy, but many struggle to get working capital loans because they don’t have a traditional credit history or collateral , say the founders of Finance companies. The fintech, which claims to be the region’s largest SME digital finance platform, uses alternative forms of credit scoring and has disbursed over $2 billion in financing to MSMEs since its launch in 2015. Today, the finance companies announced that they have raised $144 million in an oversubscribed Series C+ funding round led by SoftBank Vision Fund 2, with participation from new investors like VNG Corporation, Rapyd Ventures, EDBI, Indies Capital, K3 Ventures and Ascend Vietnam.

It has also received $150 million in lines of credit from institutional investors, some of which have been drawn down since last year.

TechCrunch first covered funding companies when it raised its Series A in 2016. The company’s previous round was a $45 million Series C raised between 2020 and 2021. Part of its new funding, or $16 million, will be distributed to former and existing employees through its stock option plan in the form of share buybacks.

The company was founded in 2015 by Kelvin Teo and Reynold Wijaya after they met at Harvard Business School. It is now licensed and registered in Singapore, Indonesia (where it is known as Modalku), Malaysia and Thailand. He recently started operating in Vietnam and will use part of his C+ series to enter the Philippines.

The platform provides online loans ranging from $500 to $1.5 million. Since its launch, it has disbursed over $2 billion in business finance to MSMEs through over 4.9 million loan transactions. Funding company customers range in size, from corner stores and e-commerce vendors to mid-sized companies, such as fast-growing startups and established corporations that want to access revenue-based funding faster than bank loans, which usually take about two to three months. to shell out, Teo tells TechCrunch.

A recent impact study calculated using Asian Development Bank methodology showed that MSMEs supported by finance companies contributed $3.6 billion to GDP and 350,000 jobs.

Covering a wide range of businesses, Teo claims finance companies have better customer acquisition costs and better loan-to-value ratios. It also accumulates data faster to train its data scoring models, which draw on traditional and alternative data sources. Traditional sources include bank statements and credit bureau information, where available, while alternatives may include transaction information, online reviews, and supply chain data feed.

One of the advantages of finance companies is that some of their data sources are proprietary, while they have exclusive rights to others through partnerships. This gives the startup an edge over new players, Teo says, as well as the amount of loan repayment data finance companies have collected since its launch. He added that the default rate of finance companies is between 1% and 2% even during the COVID-19 pandemic, which is why she was able to receive lines of credit from so many institutions.

Interest rates from finance companies are usually higher than banks, but less than or equal to credit cards – in fact, it offers a credit card with a debit line to replace corporate cards . It also partners with companies including e-commerce platforms like Shopee and Bukalapak, accounting app BukuWarung, fintech Alterra and agritech platform Tanihub that provide access to working capital loans to their SME clients. .

Teo and Wijaya argue that the main competitors of finance companies are not banks. Instead, Teo says many of his clients relied on loans from friends or family, savings and personal credit cards to fund their businesses. “The opportunity is huge because it’s a quality financing gap of US$300 billion,” he says.

In a prepared statement, SoftBank Investment Advisers Managing Partner Greg Moon said, “SMEs in Southeast Asia have historically struggled to access institutional funding and instead have been forced to rely primarily on personal financing to support growth. Finance companies are building a bridge for these companies to access more sustainable and cheaper finance by creating unique datasets of their performance and using AI-based technology to assess their creditworthiness more efficiently than traditional models.

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]]> https://welcometopoole.co.uk/online-lender-sued-by-dc-attorney-general-to-pay-nearly-4-million-in-settlement/ Tue, 08 Feb 2022 19:21:47 +0000 https://welcometopoole.co.uk/online-lender-sued-by-dc-attorney-general-to-pay-nearly-4-million-in-settlement/ A company accused of offering predatory online loans with interest rates up to 42 times the legal limit in DC has agreed to pay DC residents nearly $4 million in a settlement announced by DC Attorney General Karl Racine.

Getting a small business loan can be overwhelming and sometimes frustrating. Understand what is required to qualify for a business loan to facilitate the process of applying for and obtaining business financing.

Most small business financing is based on three main criteria: income, credit, and time in business. Depending on the lender and type of financing, however, there may be additional qualifications including industry, collateral, business plan, financials and more.

Small Business Loan Requirements

Three main factors are almost always considered in one way or another by small business lenders:

1. Income

Here, lenders want to understand if the business has sufficient cash to repay the loan or financing. Some lenders have minimum annual income requirements (eg $120,000) while others may require average monthly income for the past 3-6 months (eg $10,000 per month on average).

To verify income, lenders will often want to see business bank statements. Be prepared to provide copies or link your bank account during the application process so the lender can access this information directly from your bank.

Some lenders, especially traditional lenders like banks, will also require business tax returns and may even require personal tax returns. When tax returns are required, most lenders want to see copies for the last 2-3 years.

Financial statements may also be required. Banks, including those that provide SBA loans backed by the U.S. Small Business Administration, may require up-to-date financial statements, such as a balance sheet, income statement, or profit and loss statement since inception of the year. Financial projections may also be required.

If your business invoices other businesses, you may be eligible for invoice financing. In this case, you may need to provide an Aged Accounts Receivable Report or an Accounts Receivable Report. Your accounting professional can help you run this report if needed.

2. Credit

Here, lenders want to understand how the applicant has handled debt in the past. Some lenders check personal credit reports or credit scores, some lenders check business credit reports, and some may check both. (Some lenders don’t check credit at all, but that’s the exception rather than the rule.)

Personal credit

Not all small business financing options require good credit, but many check personal credit scores with one of the three major credit bureaus. Traditional lenders such as banks often require a minimum FICO score of 680 to 700. Online lenders may have more lenient requirements and may offer financing to those with credit scores between 600 and 600. Certain types of financing are available for those with bad credit (usually below 620-650).

The initial credit check is often a soft credit check, which does not affect personal credit scores. However, if you decide to complete the full loan application, there may be a rigorous credit check which may result in a drop of around 3-7 points.

Business credit

Some lenders will check the company’s credit. They may review credit reports from commercial credit bureaus such as Dun & Bradstreet, Equifax or Experian. Often they look for red flags such as excessive UCC deposits, collection accounts, or judgments. Other times they will check the companies’ credit ratings.

3. Time spent in business

When you complete a small business loan application, you will be asked when the business opened. This is because most lenders have a minimum time in trading requirement. Some require a minimum of two years in business, while others will provide funding for start-ups, or even start-ups.

If you have a new business, your options will be more limited and you may need to provide other information to convince the lender that you will be able to repay the loan, provided they are considering funding a startup. This can include a business plan or documentation (like resumes) confirming successful experience starting other businesses, or a track record in your industry.

If your business is incorporated (LLC, S Corp or C Corp), you can use the date of incorporation as the start date. Otherwise, you may need to use the date you obtained your business license or obtained your Employer Identification Number (EIN).

Industry

The type of company you work for is also important. Businesses are classified using NAICS or SIC codes. These are government codes that indicate the industry in which the company operates. Some types of businesses are difficult to finance, period. Cannabis or gambling companies are two examples.

Others may be considered risky by some lenders but perfectly acceptable to others. Real estate, restaurants or retail businesses are examples. Some lenders will provide financing to borrowers with these types of businesses, while others will not.

Collateral

Collateral is something tangible pledged to secure the loan. It can be heavy equipment, real estate, personal home equity, inventory, or even future receivables. Not all business loans require collateral. In the case of SBA loans, the SBA will require collateral to be pledged if available, but lenders cannot reject loan applications simply because the business owner does not have collateral.

Equipment financing by nature involves collateral: you pledge the equipment you are financing. Since the financing is secured by collateral, the interest rates are often lower than for an unsecured loan without collateral.

Amount of the loan

The amount of funding you seek will also determine what you need to qualify. A $1 million term loan will require a lot more documentation than a $10,000 microloan, for example. The larger the loan, the more control there will be.

Funding Checklist

To prepare for funding, it may be helpful to gather the following information. Not everything will be necessary, but having this information at your fingertips can make the application easier and faster.

Personal informations:

• Valid driver’s license or passport as proof of identity
• Personal tax returns

Business information:

• Tax returns for the last two years (if available)
• Last six months of company bank statements
• Commercial license (if required)
• Articles of incorporation
• Address Verification
• Void check (for ACH or direct deposit)
• Franchise Agreement/UFOC (if applicable)
• Commercial lease (if your business leases property)
• Business plan (for bank loan or SBA loan)

FAQs

How can I benefit from a business credit card?

Most small business credit cards base their decision on the owner’s personal credit scores and income from all sources (not just business income). This means that these cards may be available to small business owners with startups. Most credit cards require good credit, with minimum credit scores of at least 650 and often higher.

More than 100 business credit cards at the click of a button

Business credit cards can ensure you always have emergency cash on hand. Browse your best business credit card matches for free and apply in minutes!

Find my best options

How do I qualify for a line of credit?

A business line of credit can be a great choice for flexible short-term financing. Bank lines of credit may have stricter eligibility criteria and will often require good to excellent credit. Online lenders can be more flexible, but the interest rate will usually be a bit higher.

How do I qualify for an SBA loan?

Most SBA loans are made by SBA-approved lenders. (The exception is disaster loans, including EIDL, which are made directly by the U.S. Small Business Administration.) There are more than ten types of SBA loans and eligibility criteria vary, but generally, to be eligible, you must have a for-profit small business. a company doing business in the United States, good credit and a reasonable investment (capital injection) in the company.

Learn more about SBA loans and how to qualify here.

Is a personal guarantee required for a small business loan?

If a lender checks your personal credit, you’ll want to understand if it’s because they require a personal guarantee. When you give a personal guarantee, it means that the lender can try to recover from you personally if the company does not repay the loan.

What are the easiest small business loans to get?

Online loans are generally easier to obtain than bank loans or SBA loans. Decisions can be made very quickly. Additionally, it is important to identify what is standing in the way of loan approval.

If you have bad or bad credit, you might want to at least check out the following types of business loans:

If you have a new business, you might want to consider:

• Business credit cards
• Equipment financing
• Microcredits
• Supplier or vendor financing
• Crowdfunding

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