For many small businesses struggling to survive the devastating economic impact of the COVID-19 pandemic, the Paycheck Protection Program (PPP) promised a lifeline. Under the CARES Act, Congress approved $349 billion in emergency funding for small businesses via the PPP. After exhausting all funds in less than two weeks, the SBA stopped taking new applications. Where does this leave all of the businesses whose applications were not accepted?

It appears that Congress is poised to approve additional funding for the PPP in the next stimulus package. Considering how quickly the SBA ran out of funds for the first round, small businesses and financial institutions are well advised to prepare now for the next round. What can lenders and potential borrowers do to better their odds of success in round two?

PaymentsJournal sat down with David Barnhart, the chief experience officer at GIACT and Brian Riley, the director of the credit advisory service at Mercator Advisory Group, to discuss the Paycheck Protection Program and how small businesses and financial institutions can be ready for the second round of funding

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SBA and PPP Loans – Market Overview

* $349 billion was provided under the CARES Act.* 90% of small businesses have been negatively impacted by the pandemic.* 70% of small businesses have tried to apply for PPP loans.

A list of the top 100 banks reveals that some of the larger banks did not treat all applications equally (e.g., some FIs only accepted applications from existing customers, while others turned away many smaller businesses).

Fintechs, meanwhile, have seen an opportunity in their technology and speed to set up the procedures needed to process applications quickly. The second round of funding is likely to see a similar pattern, where the companies that are the faster and more accepting will be more efficient than their larger counterparts.

The effect of the current crisis on small businesses and the race to secure limited funding present a unique opportunity for lenders to build relationships with new customers.  When the dust settles, businesses owners will remember who fought for their business and who turned them away.

GIACT’s Fast Track Program

As fraud prevention and identity verification specialists, GIACT anticipated that a substantial number of applications would be coming in all at once and recog...