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”

Member Exclusive, Online Lenders

Lending Briefing: Debit cards are taking over

  • This year, debit cards have emerged as the preferred payment method for the majority of US consumers, dethroning credit cards.
  • Younger generations are behind this switch – even though they're also getting credit cards, Millennials and Gen Zers prefer to pay with debit.
Iulia Ciutina | September 28, 2022
Member Exclusive, Online Lenders

Lending Briefing: SaaS SMB lending competition heats up as more fintechs enter the market

  • More fintechs are coming into the US market to offer banks solutions that digitize and streamline their SMB loan application and decisioning process.
  • As this segment of the market is drawing more interest, we sit down with Ranqx to delve into its strategy of scaling in the US market.
Iulia Ciutina | September 14, 2022
Online Lenders, Sponsored

Without the right data, your bank could be turning away qualified borrowers

  • Using alternative data provides a more holistic view of a consumer's creditworthiness.
  • Financial services expert Gary Harvey explains how FIs can achieve this using the right data sets.
Equifax | August 23, 2022
Member Exclusive, Online Lenders

Lending Briefing: Gen Z is expanding the credit market

  • The US credit card market continues to grow: the number of credit cards topped 500 million for the first time ever at the end of Q2 2022.
  • Younger generations are behind the increase, experts say, as more Gen Zers start their credit journeys.
Iulia Ciutina | August 17, 2022
Member Exclusive, Online Lenders

Lending Briefing: The digital lending fintechs attracting capital in a down market

  • Funding is down across the fintech sectors compared to last year, with less capital going to big segments like payments, baking, and lending.
  • We are taking a look at some of the digital lending fintechs that still secured financing in this past quarter, in spite of the down market.
Iulia Ciutina | August 03, 2022
More Articles