President Donald Trump signed a new stimulus package on Friday that replenishes funds for the paycheck-protection program for small businesses, but hiccups around distributing loans in such a large-scale operation may be far from solved.
The new package injects $320 billion into the PPP, which is aimed at helping small businesses with government-backed loans, after its initial $350 billion in funding ran out in just two weeks.
The program had sparked criticism as publicly traded companies took loans and many small businesses were unable to secure funds.
The government has looked to clarify guidance around who can get loans this time around. And in an effort to help streamline the process and cast a wider net, alternative lenders have been approved to distribute loans for the second round of funds.
And while the hope is the newest round will reach small businesses truly in need, there is a chance the problems that existed the first time around will only be exacerbated with these latest set of loans. We talked to execs at half a dozen fintechs who explained how they’re preparing tools to help lenders and customers — any why it may not be enough.
The PPP has been a confusing process for all
Ocrolus is one of many fintechs working with either lenders or small businesses to help facilitate the application process. The New York-based startup, which raised $24 million in a Series B led by Oak HC/FC in June, works with lenders by digitizing documents, including those that play a crucial role in the underwriting process.
“There seems to be a pain point in every step of the way,” said Ethan Schwarzbach, head of business development for Ocrolus. “And that’s not to criticize anything, it’s more just the way things are. When you have to spin up a program like this so quickly and with such an amount of capital and, I would say, lack of guidance, that’s a big problem.”
Schwarzbach told Business Insider the lack of guidance from the Small Business Administration is one of the reasons why the first round of funding mostly landed with businesses that were already customers of banks.
The fact the Fed wasn’t initially clear about buying back loans from lenders made banks hesitant to underwrite for customers they didn’t have a preexisting relationship with, he added.
That lack of understanding also trickled down to the small businesses themselves.
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