Main Street businesses affected by the COVID-19 crisis now have access to a lifeline of fintech lenders.
On April 9, the United States Small Business Administration (SBA) released its non-bank application form to sign up as lenders under the Federal Paycheck Protection Program (PPP).
John Pitts, head of policy at fintech Plaid, based in San Francisco, said on April 10 that the development was “a critical step” that will ease the reach of the utility and ensure that as many companies as possible get access to the help they get urgently need.
PPP – first announced as part of the US government’s $ 2 trillion aid package on April 3 – aims to support small businesses affected by the COVID-19 pandemic by providing them with access to low-cost, forgive loans.
Although Treasury Secretary Steve Mnuchin had indicated early on that non-traditional financial service providers would be eligible to participate in the program, initial rollout was slow for non-banks, Pitts noted.
The administration was the first to certify already approved SBA lenders, which extended credit applications for their existing customers – this was “the easiest solution within a tight timeframe.”
A large number of fintechs have signed up after just a few days, while reports show some banks are stalling with loan approvals, leaving small businesses in limbo. This business cycle could do much to demonstrate the benefits that new financial actors can bring. Pitts noted:
“One of the biggest advantages fintechs have over traditional lenders is their ability to be more flexible. Fintech lenders are digital-first and can process loans quickly – a matter of hours versus days compared to traditional lenders. ”
Many banks have reportedly already announced that they will only lend to existing small business customers. For companies that may have never needed a small business loan before – as well as companies that may be too small to qualify for a traditional bank loan – “fintech lenders will become a lifeline,” he said.
However, the situation is not completely resolved. While the SBA has finally made applications for fintechs accessible, “the Fed should also do its bit,” Pitts added:
“The Fed previously announced that it would open a credit facility for all deposits participating in the PPP program and that the facility would be extended to fintechs’ in the near future. Small businesses and the lenders supporting them now have access required.”
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