Fintech startups are looking to get in on the Paycheck Protection Program, promising to underwrite loans at “speed and scale.”
The U.S. government is backing at least $350 billion in loans via the Paycheck Protection Program to small business owners to ease the economic pain of the coronavirus epidemic. Large lenders reportedly have been hesitant to participate in the program due to several risk factors, like fraud, and have been slow to distribute funds, claiming they aren’t set up for this rushed-style of lending.
Fintech companies, however, claim they are uniquely set up to handle this kind of crisis.
“In the last crisis, banks stepped away from the kinds of lending that our members do,” Scott Stewart, the head of the Innovative Lending Platform Association, told TechCrunch. “The bank process [for lending] is quite lengthy. Our members are underwriting loans using algorithms at speed and scale.”
Currently, the only fintech company that qualifies as a “non-bank” lender for the PPP is Kabbage, but more are expected to qualify to come to the aid of small businesses’ financial needs.
Plaid, a fintech startup acquired by Visa for $5.3 billion, is currently working on solutions to speed up the transmission of payroll information on small business owners’ applications.
“Speeding up loan processing could mean the difference between a business and its employees surviving intact, or going bankrupt and adding to the skyrocketing unemployment,” Plaid CEO Zach Perret told CNBC. “We are working to enable the quick and secure sharing of payroll data so critical data can be verified instantly so funds are distributed as quickly as possible.”
Funding Circle’s Head of U.S. Regulatory Affairs Ryan Metcalf also believes that fintechs’ speed is a huge asset during this time.
“Funding Circle approves loans in under 24 hours and funds them in three days, whereas banks take on average a little over a month,” Metcalf told Forbes. “Looking at SBA disaster relief funds, it’s over 30 days for those.”
While the stimulus bill has left room for fintech companies to participate in the lending process, Congress still needs to act.
“The language does include opportunity for fintechs to support, but it’s now up to the Treasury to finalize the definition. We’re working closely on this,” Sam Taussig, Kabbage’s global policy head, told Banking Dive.
For a look at major fintechs collaborations with banks, check out Pymnts.com’s list of startups and what they’re doing right now to get cash to small businesses.