AmiSight 12/1: Why Opening SBA Loans to Fintech Lenders Is a Mistake
The devil, as they say, is in the details.
That adage dates back to the 19th Century, long before the existence of Covid-19, or PPP loans, or even the Small Business Administration. Most importantly, it was coined long before the advent of Fintechs, the popular internet-based alternative lenders that grew exponentially in prominence when the SBA triggered its Federally backed Paycheck Protection Program early in the pandemic.
That has inspired a well-intended—but, in my opinion ill-thought out—rethink by the Biden
administration to open traditional SBA loans to Fintechs. A list of policy initiatives announced by Vice President Kamala Harris in early October included a proposed rule change on SBA loans that could open the door to increase the number of licenses issued to lenders—something that has not happened in 40 years.
There is good reason to be cautious about handing out licenses. The federal government backs up to 85 percent of the roughly $35 billion lent through the SBA’s 7(a) program annually. That requires a stringent litany of rules and controls, or so it was thought, and the number of licenses has been stuck at just 14 since 1982.
Want to learn more, please read my 21 Hats column today: Why Opening SBA Loans to Fintech Lenders Is a Mistake