Feb 06, 2018

New Bill Promises to Fix Small Business Lending Problems

Small businesses have been having a hard time securing protected loans from banks because of a recent decision by the Second Circuit Court of Appeals in Madden vs. Midland Funding. The decision made it unsafe for FinTech companies to buy loans from banks. When there isn’t a healthy ecosystem between lenders and secondary lenders, banks are unwilling to take on more risky loans.

In fact, after the Madden decision, loans to borrowers with FICO® scores below 644 virtually disappeared. This spelled disaster for small businesses who hadn’t really had time to build credit. It meant that business owners with less-than-perfect credit were forced to look to unstable lenders for capital, putting borrowers at risk.

Industry leaders took note of the many issues arising out of this ruling and began to put serious pressure on legislators to draft laws that would bring small business lending back to the forefront of economic growth.

In response, Senators Toomey and Warner and Representatives McHenry and Meeks introduced a simple legislative fix. Their bill, Protecting Consumers’ Access to Credit Act of 2017, clarifies the Madden ruling to provide greater liquidity in commercial credit markets, close gaps in access to credit, and allow the markets to fairly price risk profiles. Most importantly, it also allows small businesses to access the capital they need to grow.

This bill is set to make its way through congress in the coming weeks. Its passage would be a victory for small business, enabling more and more scrappy entrepreneurs to grow their businesses.

While this bill is a huge step in the right direction, it will not solve all small business lending issues. Recent developments regarding Mick Mulvaney, the current head of the Consumer Financial Protection Bureau, have shown that he intends to side with predatory lenders. For example, he dropped a lawsuit with a group of payday lenders who tricked low-income consumers into taking on loans with interest rates around 950%.

Lawmakers need to recognize bureaucratic corruption and take steps to initiate change in all avenues affecting how businesses access capital. Only then will entrepreneurship flourish without unnecessary road blocks.


About the author

Andrew Mosteller
Andrew Mosteller
Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.


  1. I had my license since June I have an Electronic business, it has been hard for me to get a start up loan. Can you suggest any places I could go

    • Hi, Darnetta. Our lending marketplace features several startup loan options, including short term loans, lines of credit, business credit cards, and more. The application takes just 15 minutes and there’s no cost or obligation to see your startup loan options. You can apply here: https://www.lendio.com/bp/basic-info?nosignup=1

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