Editor’s Note: This story was updated on April 15 at 1:50 p.m. EDT to include information about Funding Circle.
Even as about $ 215 billion In Paycheck Protection Loans, many small business owners have difficulty finding a bank that is even able to accept their applications. As a result, fintech companies are seeking SBA approval as lenders because they have the technology to get loans approved and distributed quickly.
“The hope for the fintech companies and my hope is that they will be approved as SBA lenders,” says Jared Hecht, founder and CEO of the financial marketplace Fundera.
PayPal and Intuit Quickbooks appear to have been the first to receive formal government approval. April 15th, sponsorship group announced that it was also approved. Others say they partnered with banks to get money flowing: Kabbage, for example, had collected about 40,000 loan applications totaling $ 3.9 billion a week ago with the aim of funding the first this week . Kabbage didn’t name its banking partner, but Kabbage co-founder and COO Kathryn Petralia said the partner is already an SBA lender with the infrastructure to handle PPP loans.
Kabbage didn’t want to say how much credit it ultimately wanted to deliver, even though Petralia called it “billions and billions”.
Fundera also says it has banking partners who take the loans, even though it refused to name those partners.
Even without formal approvals, fintechs have been busy courting small businesses. They encouraged business owners to apply for loans through them in the expectation that they would get approval soon. Kabbage has been accepting applications since April 4, just a day after banks were officially allowed to accept applications for loans. Many others also advertised their ability to help on their website. including Lendio and Biz2Credit.
Even if some fintech firms never get direct lending approval, they could still act as agents who pool applications. The legislation that created the paycheck protection program specifically allows banks to pay for leads. Most banks don’t need leads right now – they’re already inundated with apps – and this could prove to be a challenge as fintechs try to play a bigger role.
When asked whether his banking partners have committed to funding PPP loans through Fundera, company founder and CEO Jared Hecht said, “Nobody is obliged to do anything at the moment to find customers who meet the criteria.” He encourages applicants whenever possible to work with a community bank. Hecht: “To be honest, the most likely way to get financing is if entrepreneurs go to a bank where they have a loan.”
This is no consolation for founders like Dawn Verbrighe in Ann Arbor, Michigan. However, Verbrighe, the owner of the four-person website development company Jottful, was unable to apply to her sister’s bank because it only accepted applications from existing customers. On April 6, she tried to apply to her own bank, Chase. She received an automatic reply, thanking her for her interest and saying the bank would call her back. “They had a huge message on their website saying that due to the extremely high volume of calls, please don’t call us,” says Verbrigghe. “I really thought how should you call us?” Then she heard that Kabbage was accepting applications and applied there.
“I thought Kabbage was essentially managing this program on behalf of the SBA,” says Verbrighe. Since applying, she has received two email updates from Kabbage both asking for more information. She fears that multiple applications could trigger a fraud warningespecially if there isn’t a good way to check the status of the requests. “The challenge for small business owners is that they have no idea which of these applications will get through.”