Main Street businesses hit by the COVID-19 crisis now have access to a lifeline from fintech lenders.
John Pitts, head of policy at San Francisco-based fintech Plaid, said the development was “a critical step” that would broaden the reach of the relief program and ensure that as many firms as possible get access to the help they urgently need.
Fintech in the spotlight
The PPP — first announced as part of the U.S. government’s $2 trillion relief package on April 3 — aims to support small businesses hit by the COVID-19 pandemic by providing them with access to low-interest, forgivable loans.
While Treasury Secretary Steve Mnuchin had indicated early on that nontraditional financial services firms would be eligible to participate in the program, rollout had at first been slow for nonbanks, Pitts noted.
The administration first certified already-approved SBA lenders, which extended loan applications to their existing clients — this being “the easiest solution under a tight timeframe.”
A host of fintechs have already ostensibly signed on after just a few days, while reports state that some banks are stalling with loan approvals, leaving small firms in limbo. This conjuncture could do much to demonstrate the benefits that new actors in finance can offer. Pitts noted:
“One of the biggest advantages that fintechs have over traditional lenders is their ability to be more agile. 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 revealed they will only extend loans to existing small business customers. For firms that may have never needed a small business loan before — as well as for those perhaps too small to qualify for a loan from a traditional bank — “fintech lenders will become a life-line,” he said.
The situation is not entirely resolved, however. While the SBA has finally made applications for fintechs accessible, “the Fed has to also do its part.” Pitts added:
“The Fed previously announced they would open a lending facility for all depositories participating in the PPP program and would extend the facility to fintechs ‘in the near future.’ Small businesses, and the lenders that support them, need access now.”