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.
‘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.

Online Lenders, Podcasts

Mirador’s Trevor Dryer: ‘The world doesn’t need another high price lender’

  • Banks and credit unions are able to compete digitally with non-bank lenders.
  • Mirador helps them compete on speed and customer experience.
Michael Deleon | June 17, 2019
Online Lenders, Podcasts

MSTS’ Brandon Spear on credit as as service: ‘Find a way to solve payments painpoints and you’ll create a real advocate inside a business’

  • MSTS was started by a Fortune 100 to help with fuel payments.
  • Now, the company wants to help large B2B companies solve complex payment issues.
Zack Miller | June 10, 2019
Finance Everywhere, Online Lenders

LendKey’s Vince Passione on partnering with banks and credit unions and the future of lending as a service

  • Back in 2009, everyone was talking about disrupting banks, not working with them.
  • Founder and CEO of LendKey Vince Passione joins us to talk about his B2B approach.
Zack Miller | May 22, 2019
Online Lenders

LendingClub gets out of direct SMB lending, wants to be a platform again

  • Lending Club changes tack on its growth plans for SMB lending.
  • With Funding Circle and Opportunity Fund, look for the lender to announce more lending partnerships.
Michael Deleon | April 23, 2019
Online Lenders, Podcasts

Deserve’s Kalpesh Kapadia: ‘We promise the best credit card for our customer’s profile and life stage’

  • Young students were practically shut out of the credit system -- even worse for foreign students.
  • Deserve uses data to issue credit cards to foreign students.
Zack Miller | April 23, 2019
More Articles