Fintech lenders are ready, willing and able to help small businesses
A recap of yesterday’s webinar on how fintech lenders are responding to the small business crisis
Small businesses are the lifeblood of America and so many of them are struggling right now. But fintech can really make a difference here. That’s why we’ve made it a priority to focus on small business lending as the topic of our first webinar in our recently announced digital offerings. In the coming weeks, you can expect more content, not just webinars, but also town halls, workshops and online roundtables. In these times of rapid change, we’ll help you understand it all by bringing together financial services leaders for learning and discussion.
Let’s move on to a recap of yesterday’s captivating webinar. Unsurprisingly, we’ve heard at all levels that the volume of calls to small business lending platforms has increased dramatically as clients seek help and clarification on their position. cabbage, Lendio and Opportunity Fund have all successfully transitioned to a fully remote workforce and continue to serve small businesses with very different needs than just a few weeks ago. Kathryn Petralia of Kabbage and Luz Urrutia of Opportunity Fund shared the point of view of direct lending while Brock Blake of Lendio shared the point of view of a small business lending market.
Blake explained how lenders and investors view the current market. On the side of the initiators, about 50% of non-bank lenders have suspended the arrangements. Some investors are also able to keep their capital safe until the situation deteriorates. Conversations they have with small businesses range from those looking for additional capital to others that may be in a more financially stable position and looking to repay their current loans to reduce risk.
The biggest topic of conversation was discussion around this week’s government stimulus package (called the CARES Act) which includes $ 349 billion in loan guarantees for small businesses. This will lead to a tsunami of loan applications as any business affected by the coronavirus will be eligible for a loan. The Small Business Administration (SBA) works with very outdated technology and has never been set up to handle this type of loan volume. Blackouts are already plaguing the system as small businesses apply for funding before the stimulus package is enacted. Fintech companies are ready, willing and able to help and really need to be an integral part of this agenda if the money is to get to small business owners in a timely manner.
There are also aspects to consider regarding the SBA loans themselves. These are loans that will be guaranteed by the government with funding supposed to be provided to the lender in the short term. While it is possible that the SBA will end up providing the capital directly, this is unknown at this point. The loans will carry an interest rate of 3.75% and a term of 10 years, but some could be canceled later. The loans are flat rate for everyone (there is no risk-based pricing) as they are designed to help any affected small business get back on their feet. Of course, the most important aspect of these loans is probably how quickly this money gets to small businesses. Our panel’s guesses ranged from 10 bullish days to three or four months, a time that would be devastating for many small businesses.
As we go through a difficult time, all is not pessimistic. Luz Urrutia shared an uplifting story of how a restaurant customer helps deliver food to closed school districts. Brock Blake explained how he sees the fintech community coming together to solve new problems. More conversations are taking place and businesses are stepping up to see how they can help others navigate the current situation. We are also likely to see long term innovations and improvements in small business lending. Petralia explained how co-founder Rob Frohwein came up with the idea of enabling consumers to purchase small business gift cards. Within days, the company set up the landing page for “Help small businesses”, an offer to help small closed businesses generate new income.
If you would like to listen to the full webinar, you can access the recording here.
More from LendIt Fintech
Our next webinar is called Consumer, Paystubs & Fraud: Insights & Digital Solutions on Tuesday March 31. Register here to join us while Chad Gray, National Accounts Director at Equifax, will discuss red flags associated with pay stubs provided by consumers,
money consumers don’t tell you about, how verified data can help you increase your funded loans and more.