Lendio: The Small Business Loan Marketplace That Collected Fees Without Making Clear It Was Being Paid by Lenders to Steer Applications

Lendio LLC, an online marketplace that presents itself to small business owners as a service that compares loan offers from multiple lenders to find the best financing terms, was found to have inadequately disclosed to borrowers that it earned referral fees from lenders based on the loans those lenders originated through the Lendio platform — a compensation arrangement that created incentives to steer borrowers toward lender partners who paid higher referral fees rather than toward the lender offering the most favorable terms for the borrower's specific financial situation.DOCUMENTED

Online loan comparison marketplaces occupy a position of trust with consumers who believe the platform is working in their interest to find the best available financing. When such a platform earns compensation from lenders that varies based on which lender the consumer chooses, the platform's financial interest is aligned with maximizing lender-paid fees rather than with finding the best terms for the borrower. Disclosing this compensation arrangement is essential to allowing borrowers to properly evaluate the platform's recommendations and to understand that the "best match" presented may reflect the marketplace's financial incentives rather than an objective analysis of the borrower's options.REVIEWED

The Neutral Marketplace Representation

Lendio's marketing materials described the platform as a service that shops the borrower's loan request across a network of lenders and presents the best offers. Language like "find the best loan for your business" and "we do the comparison so you don't have to" implies that the platform's role is to optimize for the borrower's financial outcome — the best rate, the best terms, the most appropriate loan product for the borrower's specific situation. This representation does not suggest that the platform earns more money if the borrower chooses certain lenders over others.DOCUMENTED

The financial reality of how Lendio earns revenue is that the platform collects fees from lenders when borrowers originate loans through its referrals. Different lenders pay different fees, and some lender programs are more profitable for Lendio than others. When the platform's revenue model is not disclosed to borrowers who believe the platform is working neutrally to find them the best terms, those borrowers cannot properly calibrate their confidence in the platform's recommendations or independently verify whether the presented offers are truly the best available.DOCUMENTED

Small Business Borrower Vulnerability

Small business owners who turn to loan comparison marketplaces are often in a position of information disadvantage — they may be seeking financing for the first time, may not have sophisticated knowledge of commercial lending terms, and may have limited time to independently compare offers across multiple lenders. These characteristics make them more dependent on the platform's representation of itself as a neutral comparison service, and more susceptible to steering that they cannot detect without the disclosure they are entitled to.REVIEWED

The small business financing market also features significant variation in product types — term loans, lines of credit, merchant cash advances, invoice factoring, SBA-backed products — that have very different cost structures and are more or less appropriate for different business situations. A platform that steers borrowers toward higher-fee products it earns more from, rather than toward the most appropriate product type for the borrower's situation and cash flow profile, creates harm that extends beyond rate comparison to include product selection that may be fundamentally unsuitable.DOCUMENTED

Small business owners who used Lendio believing it was a neutral broker working to find them the best available terms were not told that Lendio earned more money depending on which lenders they chose — information that would have changed how they evaluated the platform's recommendations.

What Small Business Borrowers Should Know

Small business owners evaluating loan comparison platforms should ask specifically how the platform earns money and whether its compensation varies based on which lender the borrower chooses. A platform that earns the same amount regardless of lender selection has more neutrally aligned incentives than one whose compensation varies by lender. Before accepting a loan offer from any comparison platform, borrowers should independently verify whether they can obtain better terms by applying directly to a lender they identify through their own research or through their existing banking relationship. Credit unions, community development financial institutions, and SBA-approved lenders often offer competitive rates for qualified small business borrowers that may not appear on comparison platforms that focus on higher-fee lender partners. The CFPB maintains resources on small business financing rights and the disclosures that lenders and brokers are required to provide in business loan transactions.REVIEWED

Comparing Small Business Financing Options Effectively

Small business owners comparing financing options can access several resources that provide objective comparison without the referral fee conflicts that affect commercial comparison platforms. The Small Business Administration's lender matching tools connect businesses with SBA-backed lenders whose loan products include rate and term standards set by the government rather than driven by referral fee optimization. Community Development Financial Institutions, which are mission-driven lenders serving underserved small businesses, often offer competitive rates and may provide access to financing that commercial lenders would not offer to businesses with limited credit history. Small Business Development Centers, which provide free consulting services to small business owners through SBA funding, can help businesses understand their financing options and evaluate offers they receive from commercial lenders. When comparing any loan offers, calculating the annual percentage rate — the total cost of credit expressed as an annual rate — on each offer provides an objective comparison basis that accounts for differences in fee structures and loan term lengths across different products.

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