PayPal, Intuit, and Square Capital can now facilitate government loans

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PayPal, Inutit, and Square Capital have been given the green light to participate in the US Small Business Administration’s (SBA) emergency loan program for small businesses, per TechCrunch.

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The $350 billion Paycheck Protection Program (PPP) enables small businesses (those with fewer than 500 employees) to apply for loans as high as 2.5 times their payroll or $10 million — whichever is lower — to help firms meet their payroll, utilities, and insurance expenses in order to reduce layoffs. In addition, the program allows small businesses to apply for loan forgiveness if they keep staff on payroll for a minimum of eight weeks, and waives personal guarantee requirements.

Fintechs have heaped pressure on Congress to allow them to facilitate loans through the coronavirus relief program, and it’s starting to respond. Initially, fintechs were not included in the SBA lending program, and Financial Innovation Now — a group of technology leaders including PayPal, Intuit, and Square Capital along with others — asked Congress in March to rapidly include alternative lenders.

The group voiced concerns that existing lenders would not be able to distribute funds to small businesses quickly enough, leading many to go under. Including the three fintechs in the SBA lending network indicates that Congress believes that these lenders can be relied upon to help speed up digital loan distribution.

PayPal, Intuit, and Square Capital will expedite the approval process, as well as shorten the time it will take for small businesses to receive the loans — and more fintechs should be approved in order to further accelerate the disbursement of funds.

The three fintechs have outlined their commitment and capabilities to provide a boost to the emergency lending program, leveraging their existing relationships with millions of small businesses, as well as their enhanced digital capabilities. PayPal will be able to utilize its expertise in the seamless digital distribution of funds to speed up disbursement.

Intuit, through its subsidiary Quickbooks Capital, will accelerate the application process through automation by applying AI. And Square Capital has underlined how, on top of its digital capabilities, it will draw on its partnership with existing SBA lender Celtic Bank to rapidly get up to speed with the process.

Additional fintechs should be approved by the SBA to address the slow disbursement progress made thus far. While small businesses loan applications are seemingly being approved at a decent pace, the disbursement of these loans is another matter. SBA loans are notoriously slow to reach firms, with loans usually taking two weeks to process, although in the wake of Hurricane Katrina, some businesses had to wait up to 6 months to receive their loans, Forbes reported.

It is not clear how many small businesses have received funds thus far, but it is believed to be relatively low in comparison to those who have applied and have been approved: According to COVID Loan Tracker, a private website that tracks small business loans, of the 6,860 firms surveyed at the time of writing, only 4% had received PPP loans. Speed will be critical, as small businesses forced to close their doors will need capital quickly — and we think additional fintech lenders, such as Stripe and Kabbage (which is already connecting small businesses and lenders), should be included in the distribution of funds as they could leverage their advanced digital capabilities to distribute the funds at a quicker pace.

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