PayPal, Intuit & Square Can Now Offer Small Business Loans
To protect the small business industry from the devastating economic impact of the coronavirus pandemic, the Federal Government created the Paycheck Protection Program (PPP).
The program provides small businesses with forgivable loans to pay their employees.
PPP is one of the primary components of a massive COVID-19 relief package known as the CARES Act. Initially, PPP small business loans would be approved and disbursed by traditional banks or credit unions.
However, given the enormity of the economic crisis and tremendous need within the small business segment, the SBA and its partner lenders found themselves overwhelmed with applications.
The process was taking time, leaving applicants waiting for several weeks. Opening PPP to fintech providers was a logical step to better meet the goals of the program.
Companies like PayPal and QuickBooks have the technology in place to handle the rush of applicants. They can fast-track applications and get the money distributed to small businesses much more rapidly.
Opening to nonbanks also served to create a more even playing field for businesses which do not have a relationship with banks, and for sole proprietors and independent small business owners.
PayPal broke the barrier, becoming the first nonbank to be approved by the SBA to process Paycheck Protection Program loans.
PayPal’s CEO pursued approval for weeks, stressing its ability to quickly distribute funds to small businesses in need, especially those in disadvantaged communities.
Originally offering access only to PayPal merchants, the platform has opened to non-merchants too.
PayPal’s process follows the guidelines and restrictions of the SBA. If you have already received a Paycheck Protection Loan loan from another lender, you are not eligible to apply through PayPal.
Your application must be received before June 30, 2020, the date that PPP small business loan applications are no longer being accepted by the SBA.
PayPal is one of the largest fintech companies in the world. Launched in 2013, more than $15 billion in PayPal business loans have been disbursed to small businesses.
Becoming an approved PPP lending platform is PayPal’s way of helping their merchants during the challenging times of COVID-19.
Intuit QuickBooks, well-known for its payroll and accounting software has also received approval to accept applications for Payroll Protection Program loans.
More than 3.4 million small businesses use QuickBooks. According to company officials, one in 12 American workers are paid through QuickBooks’ payroll system.
QuickBooks accounting and tax preparation software have made it easy for small business owners, especially the self-employed and sole proprietors to handle the financial side of their business.
To apply for a PPP loan through QuickBooks, you need to be an existing payroll customer or a QuickBooks self-employed customer who filed 2019 taxes using the Turbo Tax Self-Employed software. QuickBooks is using its QuickBooks Capital system to process applications.
Because QuickBooks Capital is already a direct lender, it can automate, expedite, and simplify the process of applying for and receiving program funds. The focus of QuickBooks is on getting financial help to their customers as quickly as possible.
Square Capital is a fintech company created in 2009. Its goal was to develop a technology that would aggregate mobile payments and merchant services into a single platform.
Square is used by small businesses to process credit card payments, obtain financing, and track sales and inventory
Square Capital is currently working only with Square account holders. PPP small business loans are serviced by Square Capital and distributed through its partner bank.
Square Capital’s average loan size is only $7,000, which is significantly lower than the average of $240,000 approved by other financial institutions.
Their focus is on the more vulnerable such as freelancers and sole proprietors.
Square Capital has built a new online lending platform. It runs on mobile devices and tablets.
Current Square Capital customers received email notification if they were eligible to apply for a Payroll Protection Program loan.
You can apply for a PPP loan even if you have a current loan through Square Capital.
What This Means For Small Business Owners
COVID-19 has caused serious damage to small business cash flow. Accordingly, you may need a way to access small business loans quickly.
Per news reports, small businesses that applied for PPP funds through one of the fintech companies received their loan within a week.
Small businesses with an existing relationship with one of the approved fintech companies will be able to access Payroll Protection Program funds very quickly.
If you have applied for PayPal loans, for instance, your company’s background information and financials are already in the platform’s system.
If you are not already a customer, you may not be able to apply. If you apply through a fintech provider that begins to accept non-customers, you may find that the process takes longer and requires more documentation.
Overwhelmed with applications for COVID-19 relief, the SBA approval process for the Paycheck Protection Program has slowed.
Fintech companies, which already had relationships with millions of impacted small businesses, were logical partners to bring into the government’s coronavirus relief efforts.