In April, the Small Business Administration approved a number of fintechs to directly offer borrowers the loans, which are targeted at small businesses and may be forgiven if proceeds are spent on allowable expenses like payroll, rent, and some utilities. Prior to the order, companies mostly offered the loans through partner banks.
Since winning direct-lending approval, fintechs such as Funding Circle, Kabbage, and Intuit QuickBooks have indeed been issuing PPP loans--and punching well above their weight with the smallest U.S. businesses, too. It's unclear the precise proportion of loans supported by these institutions--the SBA did not respond to Inc.'s information request. However, individual data provided by the companies show a competency in meeting the needs of the smallest businesses.
As of May 29, Kabbage has received SBA approval for more than 115,000 applications, totaling more than $3.6 billion--80 percent of which are firms with five or fewer employees. As of May 18, 62 percent of business owners who received PPP loan money through Funding Circle had fewer than 10 employees. Intuit QuickBooks declined to provide information regarding the number of loans it has helped facilitate for the smallest businesses.
Even fintechs that don't have direct lending approval have made a sizable dent in the small-business lending market. Fundera, an online marketplace for small-business loans, has provided more than 50,000 small businesses with over $2 billion in funds as of June 5. It has worked with more than five partner banks, including Cross River Bank and First Home Bank.
Together, these firms tend to outperform among the smallest businesses because of their infrastructure, says William Phelan, general manager of PayNet, Equifax's commercial lending and banking data provider. He notes that their advanced technology and automation can reduce lending costs, which improves the economics on smaller loan amounts and makes lending faster and more convenient. Fintechs oftentimes can offer quick loan approvals and relative ease of use in exchange for higher fees, in some cases, than traditional lenders.
Even before the pandemic, "fintechs saw the tremendous need in the market," Phelan says. Once it began, he notes, many of them retooled their operations to strictly focus on PPP. Banks are also doubling down on technology, he says, but fintechs already had it in place when PPP loans became available.
So if you haven't already applied--or you ran into hiccups with an existing lender--tapping a fintech might be a worthwhile option. And there's still money left. While more than 4.5 million businesses have already tapped the PPP for more than $510 billion, there's currently more than $100 billion left for small-business owners, who may still be struggling from the effects of the coronavirus.
Whatever you do, just apply, says Keith Hall, CEO of the National Association for the Self-Employed, a nonprofit that provides resources to self-employed individuals and micro-businesses. Speaking during a press call organized by the U.S. Chamber of Commerce at the end of May, Hall noted that many businesses get hung up on the question of whether they're eligible for PPP funding, even though most businesses qualify as long as owners can show that the company has been negatively affected by the coronavirus. "If you're a small-business owner, and your business was in existence on February 15, you [may] qualify for a PPP loan. It would be extremely rare if you don't," he said.