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US Non-bank FinTechs might not be Qualified to Disburse Loan amounts under the Federal Stimulus Relief Package

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Jayashree Ingle Follow


Apr, 13 2020

Apr, 13 2020

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On April 3, a Payback Protection Program (PPP) has been launched by the US Small Business Administration (SBA) as part of the largest-ever $2 trillion Federal Stimulus Relief package by the US government to fight the economic slowdown caused due to corona pandemic.

But fintechs (excluding the banks) might not be qualify to avail this fund though they are angling to get up a seat at the table while allocating these funds.

The Payback Protection Program (PPP) by the SBA has been launched to support the small businesses which are badly affected due to the ongoing economic crisis worsened by the corona pandemic. The Payback Protection Program will allot low-interest forgivable loans to small entrepreneurs.

The PPP loan program with a $349 billion package is especially targeted at Main street firms institute firms which want to liquefy their assets to cover their payrolls and unavoidable expenses. It wants to involve the private sector lenders including the banks and Credit unions to service the PPP loans.

However, the official reports from Law360 state that non-bank fintechs might not be authorized by the US Treasury and SBA to service the loans though they have in-house technology and infrastructure to disburse the loans.

The federal officials believe that non-bank fintechs don't fulfill the compliance measures of Anti-Money Laundering (AML), as per the Bank Secrecy Act which is said to be the prerequisite to qualify as PPP lender.

FinTech Firms wants to Disburse the Loans 

But the fintech firms anticipate playing a role in disbursing the money into the hands of the fellow business community.

Scott Stewart, the Head of the Innovative Lending Platform Association said, “The bank process for the lending is quite lengthy. Our members are underwriting loans using algorithms at speed and scale.”

He further added, “The Treasury Department and the SBA have the authority and have been instructed in the legislation to allow us into the room. We will have to go through some sort of process to become qualified non-bank lenders.”

Scott Pearson, Financial Services partner at Manatt Phelps and Philips commented that the government has not yet issued clear guidance about recognizing them as lenders under the program

He said, “Essentially this AML rule means you won't see any Marketplace lenders or other fintech companies making these loans. They may act as brokers, going to the customer bases and working with banks to help the banks make loans but I don't think that they are going to be making the loans themselves.”

Secondly, the interest rate on PPP loans at 1% is very less which might not be favorable for the small scale fintechs as per Michael Penney, partner of Arnold and Porter firm.

Apart from lending, crypto-related firms are seeking other options to support the communities which are adversely affected by the COVID-19 crisis. Several charitable donations program programs have been launched by major industry players.  

More about Small Business Administration (SBA)

The Small Business Administration is a US government-owned agency that has been established to aid entrepreneurs and small businesses.

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Jayashree Ingle

CBW - External Analyst


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