Fintechs try to take the pain out of PPP applications

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The Paycheck Protection Program is in its third round, though small businesses still face a steep learning curve in figuring out how to access the funds they need to keep operating.

Nonbank fintechs are hoping to not only get funds from the Paycheck Protection Program into the hands of small-business owners, but also to help those merchants overcome the hurdles they encountered earlier in the pandemic.

The Small Business Administration recently opened the PPP portal to eligible lenders with $1 billion or less in assets. That includes fintechs such as PayPal, Square and Intuit. But fintechs can also aid small businesses in preparing applications and securing related documents.

It's here where payment firms that aren't necessarily making PPP loans can play a role, in effect using their digital expertise to bring more small shops into the program.

"PPP applications are interesting but also depressing. We have a founder who worked at Morgan Stanley on IPOs who saw the PPP application and thought it was the most complex structure he ever had to navigate," said Victor Ho, CEO of Fivestars, a San Francisco-based firm that develops digital marketing, customer acquisition, back-office support and payment products for small businesses.

"If it's complex for us to figure out, imagine how complicated it is for these businesses," Ho said.

Fivestars, which has a network of about 14,000 merchants, has added partnerships with fintech lenders that support PPP loans, enabling a digital process for gathering documentation for applications. As a result, it can produce qualification decisions for merchants in a few minutes.

There have been some improvements in the past few months, as merchants have become more tech-savvy as a result of the rush to automation during lockdown.

"The innovations around coronavirus, such as the move to digital payments and digitizing businesses, has brought about some improvements in applying for PPP loans," Ho said. "My main complaint about this new round is it came around so slow. We're six months from July. A lot of small businesses have failed since then."

Other firms added technology to improve the application process for PPP. FIS has processed $8 billion in PPP loan applications for 63,000 small businesses through its Real-Time Lending platform. The platform includes online forms, documentation and webinars on the Cares Act and PPP lending.

Stripe has links to PPP lenders along with information on how to apply. Square has an online PPP application portal to its lending program, which is run through Square Capital. Square's portal provides information on how participation in early rounds of the PPP program impacts the new tranche, as well as changes in the PPP requirements. PayPal also has a portal for PPP lending.

Fiserv recently upgraded its small-business lending platform, and added a program designed to improve lending for businesses in underserved communities. Black-owned businesses lagged far behind white-owned businesses receiving PPP loans last year. The SBA in January issued guidance designed to improve lending to underserved communities.

The SBA's proposed headstart for minority-owned businesses did not adequately address the need in 2020, argues Sharon Carimeli, chief compliance officer at BlueVine, a Redwood City, Calif.-based small business lender and payments company. Carimeli, who is also president of the board at the Innovative Lending Platform Association. During the first round of PPP, BlueVine provided nearly $4.5 billion in loans to 155,000 small businesses.

“The PPP application process was daunting and confusing, to say the least. I tried several times to apply through my local bank and they had no idea what they were doing, I couldn't get anyone to help me," said Lorry Sightler from Upscale Resale, a consignment store in Aiken, S.C., in an email. The store applied for a PPP loan through Fivestar's link to BlueVine. "The money has helped keep our doors open."

Fintechs were not included as PPP lenders at the start of the program, though when they were added, companies such as Veem were able to use their existing technology and data management expertise to quickly distribute loans to small businesses. Fintechs ultimately proved skilled at getting funding to the businesses most in need.

"With fintechs included, any proposed headstarts during a third iteration of PPP under the Biden/Harris administration will prove to be effective, potentially reaching and serving even more small businesses," said Carmeli, adding fintechs are able to process large volumes of applications through their own technology and partnerships. "Allowing fintechs to participate will streamline the process and get money into the hands of the SMBs that need the most aid.”