New York’s financial watchdog wants small businesses to be well-informed when seeking loans.
for that reason, New York Department of Financial Services (NYDFS) has adopted new rules governing commercial lending disclosure agreements. agency announcement In a news release on Wednesday (February 1).
“Clear and comparable disclosures are paramount when entrepreneurs and small businesses are evaluating funding,” said the NYDFS financial services supervisor. Adrian A. Harris.
“The new regulations are intended to improve the fairness and transparency of the fundraising process, allowing entrepreneurs and New York businesses to effectively assess and select the best offers available. increase.”
The regulation is based on New York’s Commercial Financial Disclosures Act (CFDL), which requires lenders offering loans of up to $2,500,000 to provide standardized disclosures to potential borrowers when making loans.
According to NYDFS, the regulation applies to different types of financing. Sales basis, close-end and open-end, factoring transactions, lease financing, general asset base, etc.
as PYMNTS recently pointed outaccess to working capital is a significant pain point for small and medium-sized enterprises (SMBs).
While large companies typically enjoy long-term relationships with preferred financial institutions, SMBs often need extra help finding sources of funding. These cash flow concerns can lead SMBs to demand more time to pay their suppliers, further eroding their creditworthiness and ability to access traditional capital facilities.
“The pressure to find suitable working capital solutions is mounting, with one study showing business loan approval rates for major banks at just under 15%, the lowest level in 10 months,” said PYMNTS. is writing “Digital Banking Will Rise to Meet SMB Needs” collaboration with NCRMore.
“Alternative lending showed the largest increase at nearly 2%, meaning SMEs are increasingly turning to fintech and digital-first services to cope with cost pressures. “
Nearly a quarter of SMBs are worried about affordable financing, according to the report, posing an existential threat to many owners.
With traditional banks often not offering online account opening and loans for small businesses and the loan process taking a week or two, anxious small businesses are increasingly turning to digital sources for financing. is pointing.
A PYMNTS study found that three-quarters of SMBs with working capital needs are most likely to use a digital-only bank as their primary financial institution.