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
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 recognized the potential for this to become a springboard for future volume. Barnhart explained that GIACT launched a fast track program to help lenders with “identity and account verification in order to streamline enrollments, alleviate compliance concerns, and mitigate fraud to ensure that legitimate business, gets the loan that they so rightfully deserve.”
GIACT’s fast track program aims to get applicable lenders up and running in as little as 24 to 48 hours, depending upon their technical capabilities. As a part of the program, GIACT has set up a dedicated team to help with contract writing, installation, etc. to ensure lenders have the help they need.
According to GIACT, the goal of the program is to, “quickly help financial institutions and other lenders responsible for the disbursements of funds to strengthen their identity and account verification processes in order to streamline enrollment, alleviate compliance concerns, mitigate fraud and ensure that legitimate businesses obtain the loans they need.”
As an added benefit, GIACT’s services can be used for other loan products within the servicing bank once the process is complete.
How the Implementation Process Works
All GIACT products and services all are interoperable, and run on a single API. Whether you’re using a case management solution or image eight or ten origination solution, they can be tailored to bring in fact based data. Each product is designed to work with any incumbent technology or be used as a standalone technology in and of itself.
For existing customers that want to add a service, it can be as easy as flipping a flag in the API. For brand new installations, GIACT will see that the customers’ needs are being met by providing the correct products and bundles to ensure that they are able to make the best informed decisions.
Compliance and Fraud Related Challenges with the PPP
High volume and loan application processing speed does not override KYC compliance regulations. All applications still require compliance checking and identity validation.
Lenders need to scrutinize businesses and principle identities to protect themselves and to keep honest businesses from being defrauded. If a fraudulent actor assumes a business’s identity and applies for a loan, then the real business applies for a loan, the application will be flagged as fraud, triggering an investigation that will delay or halt payout, blocking access to funds for a business in need.
Faster and better authentication reduces fraud and enables quicker loan access. GIACT’s digital products “help lenders to manage the complete lifecycle, from enrollments to payments,” including identification and compliance, noted Barnhart. The beneficial ID product helps lenders validate the business identity as well as the beneficial owners in real time. The OFAC product assists lenders with required compliance checks. gVERIFY verify and gAUTHENTICATE authenticate products provide lenders with the ability to verify not only if the account is open and valid, but if the name of the account is the intended recipient of the funds, or the signer on the account.
All of these products are designed to help users move their loan applications through the process as efficiently as possible while detecting fraud at the same time. The end to end process is extremely fast; data can be collected and verified in milliseconds.
In the midst of the economic crisis, GIACT is rising to the challenge and helping lenders process loans as quickly as possible, with as little risk as possible, to help struggling small businesses get the funds they need to survive. Its fast track program digital solution has demonstrated the benefits of their agility in streamlining the loan application process.
In the aftermath, having been introduced to new realms of the fast paced digital business world, customer expectations may change. Lenders may find that the more nimble companies that are able to provide more streamlined service are better able to meet customer expectations.