Banks and fintechs are preparing for an influx of small-business loan applications ahead of the launch of the $350 billion Paycheck Protection Program, aimed to help businesses negatively affected by the coronavirus pandemic.
The program, which is part of the $2.2 trillion stimulus package, could be operational this week, Treasury Secretary Steven Mnuchin told Fox News on Sunday.
Mnuchin also provided some clarity on what kind of lenders would be able assist with the program, which allows the SBA to distribute funds to small businesses with 500 or fewer employees.
"It'll be a very simple process where small-business owners can go to any of the existing SBA lenders, but they can also go to any FDIC-insured institution, any credit union and any fintech lender that has signed up for this program," he said.
The comments come as welcome news for the fintech industry, which has been lobbying for the opportunity to assist with the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
However, according to the bill, it’s up to the SBA and the Treasury Department to determine which fintech lenders have the necessary qualifications to process, close, disburse and service loans made with the guarantee of the SBA.
"This is not the time to debate the definition of a bank, this is the time to help small businesses," Sam Taussig, Kabbage's global policy head, told Banking Dive last week.
As small businesses across the country shutter amid the pandemic, many fintech lenders have expressed concern that traditional lenders won’t be able to process loans quickly enough to get them the cash they need.
Digital lending platform Numerated is already seeing an influx of banks interested in using its technology to meet the demand for businesses seeking CARES Act loans.
The company said it has tailored its technology to the Paycheck Protection Program to help banks expedite the loan application process.
"Prior to launching our CARES Act lending solution last week, we had 20 banks leveraging our platform for digital lending and digital account opening ranging in size from $150 million to $55 billion in assets. Nearly all of them will be implementing our solution," Numerated CEO Dan O'Malley told Banking Dive.
"Additionally, we have spoken with 200 banks, of all sizes, over the last couple days alone and are moving as quickly as possible to move through the contracting process to add them to our launch queue for this new SBA [Paycheck Protection Program] product," O'Malley said.
The company said 10% of all SBA 7(a) loans have gone through its platform in the past five years.
"If banks do not adopt technology to efficiently process applications and streamline disclosures and documents for these CARES Act loans, they will quickly become overwhelmed," O'Malley said. "It’s also worth noting that banks that choose to not support these loans will frustrate their customers, and we will likely see a large number of business banking relationships change hands as a result."
Core banking platform NYMBUS has also launched an automated loan approval platform for banks looking to offer the loans.
"Participating financial institutions are simply provided a portal link to direct their small business customers, where applications can be submitted and immediately processed online," the company said in a statement.
"In this unprecedented time, we are all seeking out ways to support one another," David Mitchell, president of NYMBUS, said in a statement. "We have the digital tools and full remote processing services already in place to handle the urgency of placing these vital federal funds into the hands of small business owners."
Other fintechs such as PayPal, which owns Venmo, and Square, which owns Cash App, are also pushing for the ability to help distribute the $2 trillion stimulus package to individuals who don’t have a bank account.
The two companies have already had talks with the Treasury, sources told CNN Business.
Square CEO Jack Dorsey tweeted his desire to assist with the stimulus on Thursday.
"People need help immediately," wrote Dorsey, who is also the co-founder and CEO of Twitter. "The technology exists to get money to most people today (even to those without bank accounts). Square and many of our peers can get it done. US government: let us help."