Streamlining the SBA Payroll Protection Program with Fintech Infrastructure
Last Friday was day one for the SBA Paycheck Protection Program (PPP), and by most accounts, chaos reigned. Many approved SBA lenders decided not to participate without more clarity on the underwriting due diligence expected from the Treasury Department and/or the SBA.
There’s been a widespread push for fintech lenders like PayPal, Stripe, and Square to help get funding in the hands of small businesses as quickly as possible and we are hopeful about their involvement. These companies are able to expedite a typical small business lending process that traditionally takes 60-90 days into 24 hours thanks to the modern fintech infrastructure they are built on.
The APIs offered by the likes of Ocrolus and Plaid allow lenders to (1) obtain all of the required information in digital form in near-real time, and (2) corroborate self-reported information with source data. Ocrolus digitizes documents (941s, 944s, 1090s, etc.) and Plaid can connect to a variety of financial accounts. Using these tools in conjunction, a lender can retrieve necessary data from borrower documents and verify borrower inputs.
Over the coming days, we hope that the SBA and Treasury will work quickly to empower the fintech lenders who are well suited to provide fast access to stabilizing capital. Despite the confusion among traditional SBA-approved lenders, it’s clear that most want to be part of the solution: getting funds to small businesses in an expedient and responsible manner. We need to work together as an industry to create ways for relief to be distributed as soon as possible.
We’re here to help the folks sitting on the sidelines get onto the playing field. Getting money in the hands of small businesses requires urgent attention and action. With 10 million US workers filing unemployment claims in the last two weeks, there is too much at stake to sit back and wait.
Why SBA lenders are confused
Late Thursday, April 2, the SBA issued an “interim final” program document. The 31 page document included this description of lender responsibility for loan documentation:
Confirm receipt of borrower certifications contained in Paycheck Protection Program Application form issued by the Administration;
Confirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020;
Confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application; and
Follow applicable Bank Secrecy Act requirements
To date, the SBA or Treasury have yet to release non-bank lender form applications, reducing the full scope of who can service these loans and creating further confusion.