Need to Know
- PayPal has announced it is one of the first non-bank institutions permitted to distribute small business loans as part of the Paycheck Protection Program (PPP).
- The US government allotted $350 billion for small business loans form the PPP as part of its $2 trillion federal CARES Act passed last month.
- The loans are part of a stimulus to keep companies in business during the COVID-19 pandemic.
- PPP funds will become available later this month, though the process has been slowed by the overwhelming amount of applications.
- “There is an urgent need to help every qualified business access the funding needed to ensure that as many workers as possible keep their benefits and paychecks,” said Dan Schulman, president and CEO of PayPal.
As funds allotted to help curb the lost jobs and income for millions of citizens due to COVID-19 become available, more and more institutions are looking to help spread the money around.
Currently, a large portion of the $2 trillion that was provided through the US federal CARES Act is being distributed through banks. However, fintech leader PayPal is getting in on the action by helping to distribute some of the $350 billion made available through the PPP. PayPal is one of the first non-bank organizations to distribute federal funds.
Other companies such as Square have been vying to also distribute funds. The idea is that these smaller fintechs have much broader consumer bases than specific banks, especially when it comes to having small businesses as clients. If these fintechs can easily place money into a business account, it will lower wait times and alleviate financial concerns for that many more citizens.
Some businesses have even been getting turned down by traditional banks because they do not have prior businesses with them. PayPal and other fintechs open up the door for quicker distribution.
“Small businesses have been hit especially hard by the coronavirus crisis. There is an urgent need to help every qualified business access the funding needed to ensure that as many workers as possible keep their benefits and paychecks,” said Dan Schulman, president and CEO of PayPal.
“This is a race to save jobs in the present and for the future. We are eager to deploy our capital and expertise to do our part in helping small businesses survive this challenging period.”
PayPal has long been in the loan and cash advance sector for small businesses, having funded more than $15 billion spread over 300,000 companies. The fintech has also announced other COVID-19 measures, including deferred payments for those loans, waived chargeback and withdrawal fees, and doubled rewards for its business credit card.
“This is just the beginning. We all need to step up to support our small businesses. We are actively working with governments and private sector partners to help support businesses in this time of need,” said Schulman.
PPP loans are set to be delivered into accounts this month, but the process has been slow due to a large number of applications.