FinTech Lenders Seize Opportunity to Serve Small Businesses Under PPP

Within the massive $2 trillion CARES Act stimulus package, designed to thwart the Coronavirus cascade, lies the PPP — Paycheck Protection Program — aimed at small businesses. While it was originally unclear if FinTech lenders would be eligible to participate, the SBA has now prepared an application form for ‘non-bank lenders’.

 Belated SBA Response

Although it was clear that SBA (Small Business Administration) would authorize FinTech companies to make loans under PPP (Paycheck Protection Program), there was a significant, over a week-long delay until SBA finally published the application form. As of early April 9, this is no longer the case.

 As part of the $2 trillion CARES Act — which serves as a coronavirus stimulus package to jumpstart the US economy — PPP will give out merely $349 billion. Of that, $100 billion are already allocated to banks. This leaves small businesses across America with a pool of $200 billion to stay afloat. As FinTech lenders are now in the game, small businesses will have a wider range of options if their local bank is being overwhelmed with loan demands. 

FinTech Enters the Corona Relief Stage

Among the many FinTech lenders who are already in the midst of frenzied lending action, these are the major ones:

  •   BlueVine – Headed by Eyal Lifshitz, they offer fast business loans from $5,000 to $5 million, with a minimum interest rate at 4.8%.
  •   Funding Circle – They have been futilely trying to get approved by the SBA for over a year, so their CEO, Samir Desai is likely to be the most excited by this opportunity. They offer a line of credits between $25,000 to $500,000, with 6 months to 5 years repay.
  •   Kabbage – Is already setup with a bank partnership, and have made PPP front and center on their website. Their maximum loan is $2 million.
  •   OnDeck – Is partnered with JPMorgan and headed by Noah Breslow. They offer loans within a smaller range – $6,000 to $100,000 – within maximum 12-month repay.

Between them, they will be able to quickly distribute the remaining $200 billion not allotted to banks. Will that be enough will be difficult to ascertain until the end of this year. Given that this economic crisis was caused by an external factor – virus – there is no way to tell if there will be further pandemic waves or more aggressive viral strains. History has shown that viral strains tend to weaken in order to better reproduce themselves without killing the host, but given the unique features of this particular virus it is not out of bounds to behave outside of that trend.

The economic implications of the virus have been severe, impacting the stock market and major industries across the globe, such as airlines. Additional waves will only have further repercussions — on both the sanity of millions in self-quarantine and economies everywhere.

Will the participation of FinTech firms in PPP lead to greater adoption of FinTech?  We want to know what you think in the comments section below.

 Image courtesy of Pexels.