Former SBA Administrator Applauds Growth of Alternative Small Business Lending, Says Loan Brokers are Under Watch by Regulators

Former SBA Administrator Karen Mills spoke at the LendIt Europe Conference yesterday. The title of her speech was “The State of Small Business Financing in the U.S.” In her talk, Ms. Mills summarized the negative effects that the last economic recession had on small business lending in the U.S. and how alternative small business lenders have played a large role in countering these effects and expanding access to credit.

Ms. Mills urged alternative lenders to continue product innovation to meet the varying needs of small business customers. She stated that she believes that product innovation will be a key differentiating factor among industry participants and a critical component of market success. To that end, she echoed the views of many industry commentators that regulators should allow the marketplace to mature and develop before implementing a new regulatory framework.

“I believe this is a nascent market that is serving a need that small businesses have. These entrepreneurs have found a gap in the market and they are filling it in a cost effective way… The industry should get together and the industry should self-regulate.” Ms. Mills stated.

Ms. Mills did note, however, that some regulators are concerned about certain aspects of the small business finance marketplace.

“In the U.S., we’ve seen the rise of the loan broker. This may or may not be good news.” Ms. Mills stated.

She went on to note that loan brokers were a group that were “under some watch” by policymakers. Ms. Mills’ comments are similar to those she made at the LendIt U.S. conference earlier this year but appear to be the first time she has specifically referenced the monitoring of loan broker activity.