11 Mar How PPP Changed Fintech
Financial technology, or FinTech, is a relatively new concept to some small business owners. Companies in this industry provide financial services to businesses and other consumers in order to help them manage their finances. Examples of services typically provided by these companies include algorithms, devices and software. Thanks to the Covid-19 pandemic and the release of the Paycheck Protection Program, however, the role of FinTech companies has shifted and grown.
About the Paycheck Protection Program (PPP)
The PPP was designed to provide help to businesses that were suffering financially as a result of the pandemic. Qualifying businesses were able to obtain a loan to cover up to eight weeks of payroll expenses, the cost of providing benefits to employees and/or any interest they owed on their mortgages, as well as rent and utility expenses. Many of these loans will be forgiven, as long as the recipients use at least 60 percent of the proceeds on payroll expenses.
PPP and FinTech
Many of the companies that needed to take advantage of the loans available under PPP the most were small, local businesses. These companies were often forced to close their doors for extended periods of time because of the virus. As small businesses, they didn’t have the same resources available as larger companies.
Unfortunately, because of their size, these smaller businesses were also the ones that struggled the most to get a loan approval under PPP. Large banks and other sizable lending companies focused their energy, attention and other resources on providing PPP loans to their established customers, as well as to new larger business customers with a more attractive financial profile. Small businesses often found themselves receiving outright denials before they had even submitted an application.
Luckily for small business owners and self-employed individuals, FinTech quickly came to the rescue. These companies were already targeting small businesses, and they were happy to continue their focus on these smaller borrowers. As soon as FinTech companies were given the ability to offer PPP loans to their customers, small businesses and self-employed individuals had the perfect opportunity to get the funding they needed.
How PPP Changed FinTech
Even some of the largest, most well-established lenders experienced challenges when it came to implementing PPP loans. However, FinTech companies were able to meet these challenges with ease. Because larger lenders were not focusing their efforts on small businesses and self-employed applicants, FinTech got the lion’s share of these accounts. In fact, according to Forbes, the FinTech firm Kabbage earned the title of second largest PPP lender, based on the number of applications approved. The majority of these applications came from small businesses with ten or fewer employees, as well as self-employed applicants.
As FinTech companies navigated this unique situation, they grew and evolved considerably. Some of the most notable changes within the FinTech industry following the administration of the PPP program include:
- More notoriety – Thanks to their high level of involvement in the PPP program, FinTech companies are now more widely recognized. This leads to a greater volume of customers, especially among small businesses.
- Improved reputation – The success of FinTech companies in the administration of the PPP program gave these companies a chance to highlight their strengths and show how reliable they can be as service providers. As a result, more companies are now willing to trust FinTech companies with their financial needs.
- Better services – While administering the PPP program, FinTech companies honed their services, algorithms and procedures to provide even better service to customers than they did prior to the pandemic.
- More focus on small business funding – FinTech companies continue to offer all the same services they provided before the pandemic, including payroll services, software programs and more. However, these companies now offer a wider array of small business funding opportunities as well. Not only that, but the experience gained from the administration of the PPP program allowed FinTech companies to optimize their small business funding procedures to make the experience as positive for customers as possible.
Taking Advantage of Fintech
If you are a small business owner or a self-employed entrepreneur, FinTech companies have a lot to offer. By partnering with the right FinTech company, you can be sure that you will have all of the resources you need to manage your finances effectively, get your business back on track after the pandemic and secure the support you need to continue growing.
Are you in need of funding for your small business? If so, Quote2Fund wants to help. Contact us today to learn more about our services.