Guest post: 5 things to look for in a lending network

US-PDGov

By: Amy Zimmerman

Over the last few years, getting financing for business projects has become a herculean task. In fact, even getting short term financing to repay debts since the global recession in 2007 is an arduous task. Most traditional financial institutions have introduced stringent measures which leave most borrowers out. Amidst this backdrop, lending networks have developed to fill in a gap left by traditional financing options.

If you are struggling to finance your business or you are in search of a quick loan, getting an insight on 5 things to look in a lending network is imperative.

What are some of the benefits you get from such a network? For starters, a lending network provides an easier financing option because the time spent since application to the point of getting cash is shorter. This convenience is compounded by the fact that interest rates on financing are lower than in traditional institutions as reported by CBS in 2008. In most cases, you can even get better rates to refinance your mortgage and other debts which is a much needed reprieve in the current economic doldrums.

A lending network can either consist of peers or even lending institutions which have large networks such as banks and lending programs which will suit any customer's needs. With so many of these groups around, what are some of the 5 things to look in a lending network?

Type of services offered

Everyone has unique needs and as such, the lending network you choose must offer a wide range of services. These range from refinancing options, mortgages, auto loans, bad credit facilities, short loans among many others. Moreover, if you want to join as a lender, then the network should also be ready to absorb you.

Reputation

One of the most important among the main 5 things to look in a lending network is of course its integrity and prudence in financial dealings. Many networks have featured in the news for all the wrong reasons and hence, research and read reviews and testimonials from past clients. Check your local BBB to learn of any complaints regarding the service, especially on professional conduct.

Experience

Evaluate the company's record in the financial industry to ensure they have the expertise to manage a financial portfolio. Check the company's website and evaluate staff training and individual experience in the industry before committing to work with the network. You can also look at its partners in the financial sector to ascertain whether the network is a stable financing option.

Privacy policy

Check your lending network's privacy measures to ensure it has a stringent policy. This will reduce the risk of losing your personal and financial information especially in the contemporary internet world where hackers abound.

Customer service

In most cases, you will have looked far and wide for a good financing option and hence, a lending network with dedicated, informed and sympathetic staff will definitely be the best option. Unhelpful customer service is an indicator of a more deep rooted problem in terms of the network's working ethics and practices. As such, move on if you are no comfortable with the kind of assistance provided.
Other considerations include the interest rates, licensure and other requirements. One crucial aspect among the main 5 things to look in a lending network is of course the nature of eligibility requirements. If they are overly stringent, then keep looking.

Amy Zimmerman regularly reviews online lending services. Be sure to look into the trustworthy report on Lending Club at Lending Club scam to make a clever financial judgment regarding this service.

Kinds of Banks by Ownership Types

Depending on where in the world a bank is owned, that ownership is determined in part by regulatory laws. In the United States legislative acts such as the Bank Holding Company Act of 1956 and Gramm-Leach-Bliley Act of 1999 influence allowable bank ownership structure. Several kinds of bank ownership types exist.

• Bank Holding Company

A bank holding company may be owned by a combination of shareholders and/or companies. Bank holding company's themselves own multiple banks, hence the term bank holding company. Examples of bank holding company's are Bank of America,  HSBC North America and Goldman Sachs.

• Foundations

Foundations are financial entities that provide cash flow for organizations that may include some types of banks. For example, the Bill and Melinda Gates Foundation provides banking services for underprivileged groups also known as micro credit. Foundations can also own hedge funds that are considered custodial banks in the sense they don't provide traditional banking services.
• Central banks

Central banks such as the U.S. Federal Reserve Bank have unique ownership structures with strict ownership criteria. In the case of the Federal Reserve Bank, member banks within the Federal Reserve System own it. These shares yield a fixed six percent per year return and the banks structure and authority is derived from legislative decision making. The ownership of the Federal Reserve Bank is non-negotiable meaning it is pre-determined.

• Private owned

Private owned banks are the kind of banks owned by venture capitalists, partnerships, and limited liability corporations. Ownership of these banks is not open to anyone but private shareholders thereby restricting managerial intervention via selective  decision making. These types of banks may provide specific financial services such as offshore banking. Examples of banks providing banking

• Public banks

Public banks may also be bank holding companies and have ownership shares available to the public. Shareholders determine the Board of Directors for these banks and activities and financial statements pertaining to the company is public information. For example, in the United States, public banks such as Bank of America are required by law to register financial documents with the Securities and Exchange Commission.

• Government banks

Government banks are owned by the government and may include government subsidized financial institutions that provide nationalized banking services. Fannie Mae and Freddie Mac are examples of government chartered public banks that were nationalized in 2008 for the purpose of economic stability. Depending on the political and economic structure of a country, governments involvement in banking may be limited are extensive.

• Community banks

A kind of bank that is owned by a community is a credit union. Credit Unions are federally regulated financial institutions that are owned by members and not the public. This means the credit union directly serves the interests of those individuals to whom banking services are provided. On a larger scale, the World Bank is also a community bank in the sense it is owned and serves a cooperative community of 187 member countries rather than corporations or individuals around the world.

Sources:

1. http://bit.ly/9LDvUP (Federal Deposit Insurance Corporation)
2. http://bit.ly/15btOH (Federal Reserve Bank)
3. http://bit.ly/9cmFo8 (World Bank)
4. http://bit.ly/18xYna (Federal Financial Institutions Examination Council)
5. http://bit.ly/9EP39B (Alston & Bird LLP)

Advantages of Interstate Banking For Personal Accounts

Interstate banking provides financial security, increases banking services, and provides more efficient, cost effective banking to clients with personal accounts. Moreover, advantages of interstate banking emerge out of increased competition and effectiveness among banks that have utilized interstate banking privileges and competitive financing options for consumers.

Improved and efficient interstate banking advantages was the reasoning for interstate banking back in the 1980's when banking deregulation was taking its early steps.(1)  By 1994, interstate banking had become a legislative reality with the passing of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. (4)

• Interstate check deposits

Before interstate banking was allowed, interstate banks owned by the same company had to be subject to interstate agreements allow acquisition of the out of state banks, and  individuals could not make check deposits despite the interstate bank ownership.(2) Moreover, this restricted individuals from making deposits into their personal accounts at bank branches that did not have an interstate agreement even if they were owned by the same firm according to the St. Louis Federal Reserve Bank. Interstate deposits allow business people, travelers,  and people who work and live in different states more convenient banking options.

• Competitive interest rates

With interstate banking comes economies of scale, combining of banking assets for increased loan activity, and more competitive interest rates due to the cost savings banks incur from profitably expanding their operations across state lines.(3) In other words, when banks are able to lower their costs by efficiently branching out management across state lines the costs can be passed on to consumers through interest rates that attract more profitability for the bank and better returns for clients.

• More banking locations

A clear advantage of interstate banking is the number of possible branch locations at which banking services can be rendered to clients.(2) This convenience not only can increase banks revenue but also better facilitates interstate banking activities that can grow consumer wealth. For example, individual proprietors that can spend less time making deposits and taking care of personal/business banking transactions can also increase their efficiency, and potentially their profitability as well.

• Increased service options

Another advantage of interstate banking is increased services. These service can arise out of more resources that become available to the bank through interstate banking acquisitions and branches. (3) Additionally, a wider range of clientele also puts increased pressure on banks to provide a greater range of services. Examples of enhanced services may include personal account electronic banking, expanded loan products, and more voluminous transaction types.

• Financial security

In his book 'Banking Across State Lines' Peter Rose asserts Interstate banking can benefit consumers by improving financial security regarding funds within their personal accounts. More specifically, Rose claims that the consolidation of banks to form larger corporations tends to have a stabilizing affect on bank assets thereby better protecting consumers from bank insolvency. Even though bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC), having to claim such insurance against lost assets is generally not a slight inconvenience, but rather potentially financially debilitating to banking customers who rely on one bank for all their banking needs.

Sources:

1. http://bit.ly/4xOpuh (Time)
2. http://bit.ly/dhZSRs (St. Louis Federal Reserve Bank)
3. http://bit.ly/c1I1pJ (Rose: Banking Across State Lines)
4. http://bit.ly/b2yGXU (FDIC)