John Davies, The Just Loans Group PLC and Chairman of the Association of Alternative Business Finance provides background to the launch of the Association of Alternative Business Finance.
Why was the AABF set up?
Before last year’s AltFi.com annual European Summit a group of alternative lenders and industry commentators had a working dinner to test the enthusiasm for forming a trade association for alternative lenders.
The timing was judged to be right and it was quickly identified that standards of best practice should be established to give SMEs greater confidence in dealing with alternative lenders. Awareness was also identified as an issue and before the dinner was over there was a third powerful reason for forming an association – the success the US alternative lending trade association was enjoying through sharing data to help prevent fraud and SMEs becoming over committed.
What are the associations short term aims?
Recruiting more members and having them align themselves with our best standards of industry practice. Key to this is our four key operating principles; Transparency Responsibility, Fairness and Security. Below are some examples of the commitments that underpin the Transparency Principle alone.
– Disclose all fees and charges together with the amount of funds provided, and the total amount owed to the Member. These terms should be disclosed in a clear and transparent way in documentation that is easily understood
– Clearly disclose how the funding and repayment process works, the frequency of payments, and the amount of each payment (as applicable)
– Clearly disclose any charges that may be applied and how.
Not surprisingly our operating principles lean heavily on the well established British Bankers Association Lending Code.
What values and themes do you think the new association can address?
In addition to establishing and promoting best standards of industry practice one of the association’s first initiatives is establishing a Personal Guarantee database that will help prevent fraud and SMEs over committing themselves.
What value can you bring to SMEs?
At the dinner there was immediate consensus that the challenge facing the sector was ‘alternative lending’ meant different things to different people and SMEs considering this type of finance had understandable questions and concerns about how these new lenders operated. In future when they see the AABF logo they will know the lender they are considering is committed to best industry practice.
How will the association measure its success?
Our focus in year one is to recruit like minded alternative finance providers that share our passion for the best standards of industry practice.
If in a year’s time SMEs looking for finance recognise the AABF logo and feel confident that they are dealing with a transparent, responsible, fair and secure lender then we will have achieved our major aim.