The United States' plans to include non-bank lenders in its $350 billion program to help ailing small businesses amid the coronavirus pandemic is now finally underway. Small businesses will now have access to loans issued by financial tech, or Fintech, companies.
Late last week, the United States Small Business Administration finally released the long-awaited application forms to formally enroll non-bank lenders under the Federal Paycheck Protection Program. Fintech companies have stated that the development is a critical step for the country's relief program as it will now allow small business to have access to the help their urgently need.
Through the application, non-banks such as Kabbage, PayPal, OnDeck, Square, and BlueVine, can now participate in the program without having to partner with a traditional bank. Their participation, however, will still be subject to certain requirements under the program.
The Paycheck Protection Program, which is part of the US government's $2 trillion relief package, was created to support small businesses affected by the ongoing stay-at-home orders and travel restrictions. Unfortunately, the rollout of the support and the integration of nonbanks have been slow.
US Treasury Secretary Steve Mnuchin had indicated during the launch of the relief package that they would be allowing Fintechs to participate in the program. For more than a week since its launch, Fintechs had yet to be integrated as the government had to prioritize SBA lenders, which were asked to extend loan applications to existing clients.
Several fintech companies were eventually integrated and had started to offer low-interest loans to small businesses. The integration of Fintechs comes at just the right time as some banks reportedly are facing challenges in making loan approvals, which has left some business in limbo.
Experts have pointed out that entry of Fintechs should be able to relieve some pressures on traditional banks, which are already under a lot of strain due to the influx of new loans. Fintechs also have a lot of advantages when compared to traditional lenders as their type of business can be more agile and flexible.
Due to their digitalization, Fintech lenders are also much quicker in approving loans, typically giving approvals in a matter of hours as opposed to days when dealing with traditional lenders. Fintech companies are also much more open to lending to small businesses that had never needed to take out a small business loan before. Due to this fact, Fintech lenders could provide a much-needed life-line to certain small businesses.
