Fintech Firms Lobby For Role In Sending Relief Funds To Small Businesses, Saying Government Can’t Move Quickly Enough

With many small business owners in danger of running out of cash as their businesses remain closed in the coronavirus crisis, fintech companies are lobbying to disperse government relief funds to them.

They say that using the digital platforms they have developed to lend money and process payrolls will be quicker than going through traditional Small Business Administration (SBA) procedures for disaster relief.

The current hotly debated Republican economic relief package bill, under which the SBA would disseminate aid to small businesses, along with relief to workers and big companies, gives the agency 30 days to determine relevant rules before it starts accepting applications for capital. Many in the small business community say that by that point, many businesses, particularly very small ones with inadequate cash reserves and no money coming in, will already have closed. 

The American Institute of CPAs (AICPA), the International Franchise Association, payroll processor Paychex and accounting software provider Intuit, issued an open letter to President Trump, U.S. Treasury Secretary Steven Mnuchin, Small Business Administrator Jovita Carranza and members of Congress today that called for the government to disperse funds to employer businesses through existing payroll processors. 

“We urge the federal government to use these existing systems to direct funds to small businesses so they can make payroll and not shut down due to restrictions caused by the pandemic,” they said in a statement. “In this scenario, the federal government could set up a central payroll funding account that small business payroll processors could utilize so that millions of small businesses could continue paying workers during this time of crisis.”

However, as the group noted, this help would apply only to employers. The vast majority of all small businesses are nonemployer firms, meaning they are solo firms or partnerships that have no employees on payroll.

Rohit Arora, CEO of Biz2Credit, a marketplace that matches small business borrowers in all size companies with lenders such as community banks, sent his own open letter to Senate Majority Leader Mitch McConnell and other legislators offering the use of the company’s tech platform, and said he has been speaking with Paychex. “We have to ensure fintechs are part of the process of giving access to credit,” he says.

He has found it is next to impossible to secure loans for customers in the current environment.

“All lending has stopped,” says Arora. “We are seeing the SBA disaster loan program is not really being activated. City programs are not really activated. In my experience, it takes two months before they have delivered money in the past.”

The SBA’s loan applications require significant, time-consuming documentation, he notes. “Typically, the disaster loan application program has a 15-page application,” he says. That does not include the multiple documents that must be attached, such as tax returns, he adds. 

Fintech companies have already developed quicker ways to evaluate borrowers’ ability to pay back that are very accurate, according to Arora. 

“Companies like ours have developed the data to do that,” he says. “We can do it very quickly.” 

Arora’s company serves 250,000 small-business customers. “We can see their sales dropping every day,” he says. “In four to five weeks they will not be able to sustain themselves. For most of them, their working capital is only one to one and a half months. If things remain like this another four to six weeks, 75% of the businesses will go under.”

Some entrepreneurs are skeptical that the government will be able to deliver any form of aid to small businesses quickly enough to help them. Kevin Kelly, CEO of Emerald Packaging, a 250-employee manufacturer in Union City, Calif., as well as a landlord to several small businesses, is among them.

He is trying to do what he can to help struggling businesses in his community. For instance, he has started ordering lunches and dinners every day from a local restaurant for the team working in his heavily sanitized factory.

“It will come down to individual businesses helping other businesses,” he says. “If you have capital, you should be looking at how you can deploy it to keep people in business so, on the other side, we have customers.”