Fintech Finally Get Its Chance In PPP Round Two
Hi all, Julie here.
We’re going to talk about a topic we covered a few weeks ago in one of my first issues: PPP, or the Paycheck Protect Program.
Before we get started though, I wanted to highlight a bunch of announcements Ian and I had earlier this week (which you can read more about here:)
- FTT Jobs is a career focused newsletter that launched on Wednesday, and it’s free for you. If you wanna sign up for FTT Jobs, click here. We already have 200 signups, and have a number of companies interested in the job board too (if you are, email Ian at ian@fintechtoday.co.) If your friends are looking for roles in fintech, we highly recommend sharing FTT Jobs with them—it’s free for the first month for non-FTT+ members with this link.
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We’re also going to be doing monthly Q&A’s with people in the fintech industry. Our first one is with FTPartners’ founder and CEO Steve McLaughlin, which goes live on Tuesday. Ian and Steve had a wide ranging conversation, from Steve’s journey at Goldman and leaving to start FTPartners, advice he has for founders around navigating COVID, and M&A and IPO’s in the fintech space, and Snoop Dogg. It’s an hour long and definitely worth your time.
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Lastly, we’re also hosting our first virtual event, presented by Alloy, also free for subscribers. Ian and I are going to be talking to the founders of Rho Banking and Alloy, as well as the head of product for Better.com to learn more about how these companies have shifted their product strategy and roadmaps to better serve their customers. To RSVP, click here.
Now, back to PPP loans. In case you forgot, the first time around was a shit show. Banks weren’t able to start taking applications when the government said they were going to, even when they did, only customers with long standing relationships seemed to be able to get through, and worse yet, a bunch of public companies applied for it rather than going to the bond market. Oh, and the funds ran out in less than 2 weeks.
According to a new story by CNBC this weekend, more than 200 public companies applied for at least $854.7 million from the government program, which was supposed to act as emergency funding for small businesses without access to other sources of capital. #Oops. Probably the most high profile case was Shake Shack (which later returned the money), but there were a slew of others and the list could get longer.
There’s another $310 billion on the line starting tomorrow, and I’m not sure how much better this round will go, but there does seem to be at least some progress in both the rules surrounding the program, as well as on the processing side by getting some tech folks involved.
During the first round of loans, companies like Square and PayPal didn’t get approved until the money was basically gone. This time, they’ll be around from the start. I’ll be interested in seeing both how their systems handle it, as well as how much of the funding they’re able to send out (which is partially tied to point 1).
Many of the programs, both at the fintechs and at traditional banks, have started taking applications already in hopes of smoothing out the process come Monday morning. According to Jackie Reses, the head of Square Capital, they’ve seen huge demand already:
Square obviously deals with some very, very small businesses that often make most of their revenue from in-person sales. This means that the loan applications might skew smaller than the average on the whole, and it also means that these funds could mean life or death to many of the applicants. Reses later tweeted that they’ve been working through backlogs all weekend.
So if you're a Square seller, especially if you're one that uses their payroll offering, using them to apply for a PPP loan is almost certainly your best route. Another option (albeit one that many businesses don’t have) is to go to a bank that you have a long standing relationship with. Other fintechs are trying to leverage their technology to help those that need it most as well, such as Gusto and Plaid. We referenced Plaid in our first newsletter, discussing how they were trying to help companies process data faster. We didn’t talk about Gusto as much, but they ended up playing a pretty big role in the first round considering how little time they had to get stuff up and running. The company specializes in payroll and benefits processing for small businesses, and says it helped more than 70,000 customers get the documentation they needed to apply for the program. In a blog post, Gusto went on to say that those customers qualified for $3.4 billion of the government funding. Gusto’s also launched other services for small businesses, like helping them with Employee Retention Credits, available for businesses that have been impacted by COVID-19 as a part of the CARES Act.
With larger businesses often having the long standing relationships and getting funding faster, it makes it that much more important for folks like the ones we’ve discussed to help in some cases the smallest of small businesses stay afloat.
Things are different with round two of PPP—banks and fintech companies are on a more level playing field and both have equal opportunities to tap into the available loans for their customers. If fintech firms can step up and make a difference, we won’t be the only ones that notice.