FinTech: Dangerous Borrowing in MCA

Borrower’s practice of “stacking” loans represents a serious challenge to Fintech lenders. Stacking occurs when a borrower rapidly takes out multiple loans, either to accumulate financing or to repay other, older and perhaps troubled loans.  While some lenders may permit stacking, it is a questionable policy as it increases the risk of borrower default.

The credit crunch is partly responsible, as small businesses have increasingly been denied when applying to large banks for financing. As a result, many companies turn to alternative lenders to take out multiples small loans.

Several factors have made “stacking” both easier and alluring for borrowers. Very rapid lending processes enable borrowers to get several loans via the internet long before any of financings appear on the credit reports that underwrites rely upon. In addition, many alternative lenders are neither required to nor interested in reporting their activities to the credit bureaus. The potential danger to FinTech lenders and investors of “stacking” is emblematic of the challenges facing an industry in its early stages of growth. Some stumbles and bruises are likely to result.

http://www.businessinsider.de/alternative-lenders-are-opening-up-an-opportunity-for-dangerous-borrowing-2016-6?IR=T&utm_medium=email&utm_medium=twitter%3Fr%3DUS&utm_source=fintechweeklycom&utm_source=twitterfeed

http://thefinanser.com/2016/06/americas-regulatory-issue-many-cooks.html/?utm_medium=email&utm_medium=twitter&utm_source=fintechweeklycom&utm_source=twitterfeed

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Ken Margolis | Managing Partner Castle Placement, LLC
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