Funding Circle has given its backing to a landmark law in America to introduce more pricing transparency for small businesses when comparing loans.
The state of California is introducing a Truth in Lending law, which will require certain data to be disclosed in commercial credit agreements as is already the case for consumer loans.
Funding Circle’s US platform has given its backing to the move through its role on the Responsible Business Lending Coalition (RBLC) and is leading calls for a speedy introduction.
“We estimate the law could result in annual savings of $617m (£472m) to $2.9bn for the 127,000 California small business owners who may select a lower-cost financing option when empowered with the ease to shop and compare financing options,” Ryan Metcalf, head of US regulatory affairs for Funding Circle, said.
Read more: Funding Circle dropped from FTSE 250
The RBLC said small businesses across the state would benefit as would those that are most underserved.
“Minority-owned, immigrant-owned, and smaller businesses disproportionately apply for online financing and would benefit the most from the ability to comparison shop under the new disclosures required,” it said.
“With the potential to generate hundreds, even thousands, of new jobs as well as stimulate $665m to $5.4bn in new economic activity annually, these savings will not only benefit small business owners but also yield overwhelmingly positive effects on California’s economy.
“Furthermore, the economic impact of these uniform commercial credit disclosures will multiply over time as transparency continues to drive greater competition and lower pricing in the marketplace.”