With the help of McGuireWoods, Funding Circle, the leading online small business loan platform in the United States, joins fintech companies Intuit, PayPal, and Square, to participate in the U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP), which was enacted as part of the CARES Act last month. To recap, the PPP provides aid in the form of potentially forgivable loans to eligible small businesses. The loans may be used to cover qualified payroll costs, rent, utilities, and interest on mortgage and other debt obligations in order to allow borrowers to maintain pre-COVID-19 employment numbers and compensation levels to their employees.
The coronavirus response landscape is shifting daily, and sometimes hourly, as regulators fight the clock to roll out aid fast enough to help keep small businesses afloat. For example, as we have previously reported, there was initial uncertainty about whether nonbank fintech companies would be able to participate, as the Treasury and SBA were in a time crunch to get the program up and running, and the lender application did not initially include fintech lenders – only federally insured depository institutions, federally insured credit unions, and certain farm credit institutions.
Although fintech lenders have now been approved, the SBA announced last week that the initial $349 billion allocated for the program had already been drained, with many small businesses still without funding.
On Tuesday April 21, the Senate reached an agreement to replenish the PPP with another $310 billion, and the House passed the measure today. While $250 billion of the $310 billion is added without limit, the remaining $60 billion is reserved for small and midsize banks, credit unions and community development finance institutions.
Many fintech lenders already have established relationships with small businesses and sole proprietorships, the intended beneficiaries of the PPP. Also, these fintech companies often have streamlined systems and online platforms in place to efficiently extend loans remotely. Notably, Funding Circle announced it will be providing support to applicants in four languages — English, Spanish, Mandarin, and Hindi, exemplifying just one of the ways that fintechs can make sure money gets to minority communities and smaller businesses, and reach customers that some traditional banks don’t.