Covid

Fintech Companies to Participate in Paycheck Protection Program

April 14, 2020

Fintech companies are stepping up to the plate. Here is how you can expect to see fintech companies participating in the paycheck protection program.

Image of PayPal logo, a fintech company to participate in the PPP.

By now, many small businesses have heard of the Paycheck Protection Program, a component of the CARES Act, which is responsible for the COVID-19 stimulus package.  As we know, the program aims to keep American small businesses afloat during the stay-at-home orders issued by various state and federal government agencies.  The program hopes to accomplish this is by extending disaster loans to eligible small businesses.  While this all sounds hopeful, there is a little hiccup.  Unfortunately, banks are not limitless pools of funding.  Frankly, many banks are quickly encountering their lending limits.  So, what to do now, with so many businesses still needing assistance?  Enter the fintech companies to lend a hand.

There is no perfect solution to the current small business payroll problem.  However, there are things we can and should try.  So, let’s learn about the role fintech companies could play in the Paycheck Protection Program.

Recap of Paycheck Protection Program

Now, it’s important to understand what the Paycheck Protection Program (PPP) entails.  Passed on March 27, 2020, the CARES Act was put into place to provide assistance to individuals and businesses during the coronavirus crisis.  Among the various programs, the PPP in particular helps protect the livelihoods of individuals through their small business employers.  Although the program trickles down to individuals, its purpose is twofold, as the goal is also to keep the small business from closing permanently. 

While this is certainly a welcomed effort, the assistance doesn’t extend to everyone.  In fact, there are some noteworthy requirements for eligibility.  To be eligible for the Paycheck Protection Program, a company must:

  • Have 500 or fewer employees
  • Prove their loan request is to support ongoing operations
  • Confirm that they will use funds received to pay workers
  • Confirm that they will use funds to pay rent or mortgage
  • Not double-dip by also applying for the SBA Economic Injury Disaster Loan (EIDL)
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Notably, non-profit organizations, self-employers, and tribal businesses under the employee count threshold may also be eligible for funding.  While loan amounts may not exceed $10 million, businesses can receive up to 2.5 times their average monthly payroll.

As you can see, the PPP can be a lifesaver when it comes to keeping small businesses afloat.  However, this depends on how long the economy is shut down, and how much funding lenders are able to provide.

Fintech Companies Defined

So, if you are in the financial industry, you are probably familiar with fintech companies.  Still, even if you aren’t in finance, you have likely interacted with them in one way or another.  A fintech company is simply a company that uses financial technology for the purpose of improving and automating financial services.  Some of the well-known names in the fintech realm include Paypal and Square.

The reason why fintechs are an important consideration in the PPP is because they are basically one component of the PPP funding trifecta.  The three components making up the major lending players include banks, fintech companies, and the U.S. Treasury.  Without the resources of all three, any kind of meaningful assistance would be short lived. 

New Lender Application for Fintechs

Prior to April 9, however, it was uncertain as to whether the U.S. Treasury would allow fintechs to participate in lending.  However, Florida’s Senator Marco Rubio pushed for the motion, and proudly announced the update via Twitter.  In a tweet, Rubio noted the increase in “ease & availability of #PPPloans for #smallbusiness.”

10.0.0.56 8888 blog fintech companies participate in paycheck protection program

Banks and fintech companies aren’t the only ones with their ear to the ground, though.  Payroll companies, who are an integral piece of the financial transactions, are also weighing in on the move. 

Kevin Welch, CEO of Journey Payroll & HR, headquartered in Colorado, feels optimistic about fintech companies’ involvement in the Paycheck Protection Program. 

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I have witnessed countless banks do a phenomenal job with the PPP.  Even with these banks working around the clock, and putting their community first, this is a smart move by the U.S. Treasury,” said Welch.

Fintech Hesitations

Even though heavy-hitters like PayPal have already begun lending to borrowers, not all fintechs are as quick to jump into the arena.  While the Treasury did approve fintechs to be included in the PPP program, each individual fintech company must opt in.  Decisions will be based on the company’s bandwidth and ability to lend, while still protecting their own interests. 

To access PayPal’s PPP application process, please go here: https://www.loanbuilder.com/ppp-loan-application

Eyes on the Future

The good news in all of this is that everyone seems to be taking a proactive approach to the COVID-19 crisis, and how it is affecting the economy.  No one wants to idly stand by and watch small businesses fail.  Far from it, in fact.  Banks, select fintech companies, and the U.S. Treasury have vowed to work together to do what it takes to help keep the American Dream alive. 

So, continue to check in to remain updated by your trusted payroll provider, whose future vision will continue to include you.

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