Online Lenders

‘7 out of 10 could qualify’: Government lending shutdown can provide boost for fintechs

  • The US government shutdown will impact mainstreet businesses.
  • Fintech lenders can find a way to pick up the slack.
close

Email a Friend

‘7 out of 10 could qualify’: Government lending shutdown can provide boost for fintechs

According to PayNet data, 7 out of 10 small businesses that apply through the SBA credit market could safely gain access to credit through conventional lending programs.

Government loans during the shutdown: The media has focused on the economic impact of unpaid government employees during the current US government shutdown. But the impact on small businesses that tap SBA loans could dwarf that.

PayNet, a data consortium that analyzes the credit quality of 25 million mainstreet businesses, believes there is $20 billion of business credit at risk during the political standoff. Given a multiplier effect, this would result in approximately $50 billion of impact to US GDP.

According to Bill Phelan, co-founder and president, some banks anticipated the government shutdown in December. These lenders pre-committed capital for 30 to 45 days to take advantage of SBA guarantees. That would mean their inventory is running low.

“SBA guarantees makes the system run, like the grease in the gears,” said Phelan. “Those gears are shutting down. The tank is empty.”

The fix: No one knows how long SBA lending will be stifled. When PayNet looked at the data, the company found that 72 percent of businesses that borrow using SBA loans would qualify for conventional loans.

Phelan cites three beneficiaries that can pick up the slack in SBA lending: equipment financing companies, traditional banks, and fintech lenders. He estimates the banking system’s capacity to lend at $1 trillion, the equipment financing industry at $1 trillion and fintech lenders at $20 billion — more than enough to supply credit to SBA borrowers.

“The loans may not be the same size and they might be at different terms, but mainstreet businesses should be able to piece together credit through various conventional programs,” he said.

0 comments on “‘7 out of 10 could qualify’: Government lending shutdown can provide boost for fintechs”

Online Lenders

Goldman Sachs partners with Walmart to offer SMB loans to online sellers

  • Goldman Sachs has built its retail Marcus brand into a $100 billion bank.
  • It continues to sign partnerships with leading brands to provide financing to their customers.
Zoe Murphy | September 24, 2020
Online Lenders, Podcasts

Zest AI’s Mike de Vere: ‘You don’t have to give up economics to be more fair’

  • Machine learning and AI models are changing the face of lending.
  • They're able to clarify the tradeoffs between fairness and economics and optimize them.
Zachary Miller | September 08, 2020
Online Lenders

How Fiserv’s partnership with VMware enabled it to launch a PPP application in 8 days

  • Time was of the essence for SMBs when the Cares Act was announced.
  • The two companies stood up a PPP app that was responsible for distributing $1.4 billion in PPP loans.
Zachary Miller | September 04, 2020
Online Lenders

‘No knee-jerk reactions’: How LendUp quickly adapted to be resilient during the pandemic

  • Anu Shultes is a cancer survivor with 25 years experience in financial services.
  • She brings her own personal resilience to the challenges her firm faced during the pandemic.
Zachary Miller | August 20, 2020
Online Lenders, Podcasts

Earnest’s David Green on student lending in today’s economic environment

  • The pandemic's impact is being felt on the student lending side.
  • Earnest's chief product officer David Green joins us to discuss how to help students pay for school.
Zachary Miller | July 31, 2020
More Articles