Short Term Lending Is Still Alive in a Pandemic
Short term lending still has a place in American finance. Though the industry has seen a number of regulatory changes in the last few years, including the tightening of high-interest-rate loans, there has been an increase in the need for short-term funding gaps as companies continue to find ways to battle the turmoil brought on by the pandemic.
For many short term lenders, the need for their services and affordable, easier-to-access loans has never been more important.
Demands in the U.S. Market
The pandemic shut down the U.S. economy, along with the rest of the world, forcing people inside and buying power to all but dry up. From the millions of unemployment filers to the various short-falls of government lending programs, short term lenders, including those offering alternative repayment options, have become a must in the current economy.
Changes continue to happen. Regulators have had to pull off some regulations to find new opportunities to support struggling businesses. Global banking regulators, for example, offered key lenders more breathing room from capital buffers in recent years, promising to cover losses on loans to borrowers.
Personal Loan Lenders Are Moving Fast to Fill in Gaps
One of the most worrisome aspects of the financial side of the pandemic is the limited number of resources for consumers. In mid-April, the $349 billion emergency small business lending program simply tapped out and ran out of funds. The funding which is aimed to help shore up businesses struggling to pay employees through the Paycheck Protection Program, barely scratched the surface for company’s in need, putting consumers at risk of not having the funds they need to feed their families.
While businesses continue to struggle to meet employee needs, the other side of the coin is the struggle of everyday consumers. Short term lenders may offer the support these individuals need in order to keep things moving forward.
Many consumer-based lenders have offered flexible repayment terms. Some have pushed off first payments for new loans for months in order to give consumers breathing room in the hopes that people can get back to work sooner. Other companies have reconfigured loans to give consumers longer terms with a few months of a break in between.
Many people are in incredible need for these short-term loans right now. Paychecks have fallen back. Many state unemployment agencies have found themselves dealing with an influx of new applications that their old software cannot handle. This, coupled with a federal government promise of additional funds not yet making it, has pushed consumers to need fast, easy to access short term loans simply to buy some time.
There’s little doubt short term lenders must continue to abide by regulations. That means meeting new changes for interest rates and disclosure statements. Yet, the current conditions could offer a light at the end of the tunnel for lenders who have been, to this point, struggling to find borrowers who need their services. For many, this is the ideal situation to provide those financial support services.