Small Business Financing: The State of Regulation

3 min read • Dec 16, 2014 • Erik Larson

Recently, Charles Green interviewed Lendio CEO Brock Blake about the state of regulation in the alternative lending industry, and the practice of loan stacking. Here’s what he had to say:


CHARLES GREEN: I’m Charles Green with more AdviceOnLoans and I’m with Brock Blake, CEO of Tell me first, what is and how are you different than a small business lender?

BROCK BLAKE: So we are not a direct lender ourselves. What we’re trying to do is make it easy for that business owner to connect with the right loan. In small business financing, there are many different loan products. From merchant cash advance, to SPA and working capital, there are all these different options. If you’re a small business owner, it’s difficult to know, okay, which options are the best fit for me. So at Lendio, what we’ve done is we’ve accumulated all the lenders in one place, and we’ve created an experience where that business owner comes in, we use their information to match them up to the right loan product and then we can get them loan offers on behalf of the lender, and that customer can decide which loan offers are the best fit for them to get the financing that they need. So, we’re trying to take a marketplace that’s very large, and inefficient, and kind of confusing and try to make it simple.

CHARLES GREEN: Great, we talked today about some new issues that traditional bankers don’t face like loan stacking.

BROCK BLAKE: Loan stacking.

CHARLES GREEN: Why don’t you talk about that issue that’s coming up?

BROCK BLAKE: Yeah. So, you know, this was a topic of conversation for an event today, and as you know, in this industry I think there’s an opportunity for us to be able to be proactive. We don’t have a lot of regulations, and some people are going to take advantage of that. And one of the ways that they do that is stacking. So, stacking means that if a business owner already have an advance out with one of the merchant cash advance lenders or another lender. Normally, what you would do is if you’re going to underwrite that loan, let’s say they have $20,000 advance out, and you’re going to underwrite and give them an addition of $40,000. Normally what you would do is you take 20,000 and pay off the other 20,000, right? And they would – and so the customer would get an additional 20,000, the difference between forty- twenty.


BROCK BLAKE: That makes sense. Stacking means that you don’t pay off the other loan, just add 40,000 on top of that. So now, the customer has the $20,000 loan and a $40,000 loan. And so they’ve got $60,000 worth of loans outstanding, a larger payment, and in some cases that’s appealing to that business owner, because they think, oh, more money is better. But then they get caught up into these high payments.


BROCK BLAKE: And so, it’s the business owner, doesn’t always know better because sometimes it is a feeling but, you know, after the fact that they realize, yeah, I put myself into a tough spot.

CHARLES GREEN: Right, we talked about a lot of regulations today, and a lot of people participating in the industry are worried that there’s more regulations could be coming. What do you think about it?

BROCK BLAKE: I think there’s no doubt that it will come. I think to what extent is the bigger question. I think that events like this are fantastic because we’re talking about the various issues. We’re working together, and say bring a light and shine light on it. And I think that the more that we talk about it and take action among various players in the industry, the better for everyone. Because then self-regulation happens and you don’t need to have external forces coming in and tell me how to do things.

CHARLES GREEN: All right. Well, thanks for this conversation Brock. Good luck.

BROCK BLAKE: Yeah, my pleasure. Thanks Charles.

CHARLES GREEN: You’re welcome.


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Erik Larson

Erik Larson frequently writes for Lendio about SEO, Digital Marketing, Social Media Marketing, Business Loans, and whatever else strikes his fancy. He can be found on Google+ and Twitter.