Fintechs Approved to Make Small Business Loans Under Paycheck Protection Program
After aggressive lobbying, three fintech companies ⎯ PayPal, Square Capital, and Intuit QuickBooks Capital ⎯ recently announced that they were authorized by the federal government to make small business loans under the $349 billion Paycheck Protection Program passed as part of the CARES Act late last month. Despite running out of its initial tranche of funds, the Senate today approved an additional coronavirus relief package, which included $310 billion more funding for the program. That legislation is expected to be passed into law and signed by the President later this week.
“There are all these stories of businesses that didn’t have a bank relationship, and they’re going to anyone who’ll listen,” said Steven Busby, CEO of Greenwich Associates, a Connecticut-based data analytics firm.
According to American Banker, the Small Business Association approved more than 941,000 loan applications as of last Monday. However, banks mostly prioritized existing customers, which left many small businesses seeking assistance without core banking relationships.
Most fintech borrowers need less than $25,000, but many banks are not offering those smaller loans during this unprecedented time.
The Paycheck Protection Program, signed into law on March 31, offers small business loans that can be forgiven if spent on payroll and operational expenses during the first few months of the loan. It permitted fintechs to participate, but the SBA and the Treasury Department formed a separate approval procedure for nondepository lenders. That meant that much of the program’s $349 billion was allocated before fintechs were approved to participate.
“The demand is clear,” said John Pitts, policy lead for Plaid, a San Francisco data and technology firm. “It won’t be met in full by the first $349 billion.”
With new funding on the way, the approved fintech lenders will be able to more fully participate in the program.