After COVID-19’s initial shock, lenders begin ramping up originations once again
- With PPP no longer an option, lenders have to look for new ways to stay relevant during the pandemic.
- For many lenders, Q3 is proving more successful than Q2 in loan originations, though still nowhere near pre-pandemic numbers.
For fintech lenders, COVID-19 meant a significant drop in loan originations.
In April, leaders in the industry, including Kabbage, OnDeck and LendingClub, began cutting off lending altogether. Existing loans started to go bad as consumers and businesses faced unprecedented financial stress. By the end of April, OnDeck reported 45% of its loans to be in some stage of delinquent. Kabbage, once the largest fintech lender to SMBs, ended up selling itself to American Express for about $850 million– a fraction of the $1.2 billion it was worth in 2017.
With the lending spigot closed, various digital lenders like Square and Kabbage, lobbied the Trump administration to participate in the distribution of funds from the CARES Act. The Paycheck Protection Program proved a godsend for some of these lenders. They also were some of the most active issuers of assistance loans throughout the U.S., rivaling many of the big banks. Kabbage ended up issuing $7 billion in PPP loans, helping nearly 300,000 businesses. After being approved by the SBA to participate in the PPP, BlueVine issued over $4.5 billion, saving 470,000 jobs. Intuit’s QuickBooks Capital originated over $1 billion after standing up a PPP app after just 11 days.
For many lenders, the Payment Protection Program became a lifeline. They could issue loans backed by the U.S. Government amidst the crisis and still stay afloat. But with PPP now out, lenders have to find new ways to stay relevant during the pandemic. What’s happening now is a slow increase in loan originations, as lenders begin to pick themselves up from the initial shock of the pandemic.
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