Fintech could soon get a bigger share of government-backed loans

Good morning and welcome to Protocol Fintech. This Thursday: SBA Loans, Warren’s Crypto Mining Scrutiny, and Love in the Metaverse.

loan permit

The Biden administration’s efforts to improve access to capital for small business owners could present a huge opportunity for fintech lenders.

Fintech companies could be a bigger part of the SBA-backed loan market. The Small Business Administration will soon propose a rule change that could lift the 40-year moratorium on new licenses for nonbanks to lend through its largest lending program.

  • The number of fintechs and other non-banks that can provide SBA-backed loans through the 7(a) program, worth about $35 billion annually, has been limited to 14 since 1982. non-bank on loan sourcing).
  • But, as Vice President Kamala Harris said on the list, the Biden administration hopes raising the ceiling will make lending more accessible. policy initiative Issued Oct. 4, it aims to promote racial equality in small business ownership.
  • 7(a) loans are available up to $5 million and are insured by SBA up to 85%. struggle with other types of fundingbut data show long-term loan disparity by race and income.

Fintech believes they can help. When companies were able to write SBA-backed Paycheck Protection Program loans, Federal Reserve Bank of New York Fintech lenders have found that they “likely served borrowers who otherwise would not have been able to obtain financing.” lacked existing banking relationships.

  • “The fintech industry often serves small, low- to middle-income businesses owned by minorities. .”
  • Senator Tim Scott and Senator John Hickenlooper proposed last year Bill to lift moratorium on new SBA lending licenses. supported by Think tanks such as the Bipartisan Policy Center.
  • “If we are serious about expanding access to capital for business owners and entrepreneurs who have historically lacked such access, if that is part of the original purpose of the SBA Funding Assistance Program. , the range of people who can participate needs to be expanded, said Dane Stangler, director of strategic initiatives at BPC.

This can be a long process. The rule has yet to be proposed, and an SBA spokesperson declined to comment on when. The fintech firm is credited with helping more businesses access his PPP loans, researchers found Some of these fintechs were involved in the majority of the fraudulent loans. . Stangler said the rules need to be crafted carefully, but that changes should be considered “if the goal is to expand access to capital.”

— Ryan Defenbaugh (e-mail | | twitter)

A version of this story first appeared on Protocol.com. Read it here.

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on the money

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will move

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Today’s cross-border payment infrastructure is slow, expensive and inefficient. However, digital assets have the ability to make slow settlement times and high transaction fees a thing of the past.

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