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New PPP small business loan bill excludes fintech lenders, threatening the smallest businesses

April 22, 2020, 3:29 PM UTC

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The coronavirus stimulus package was supposed to give fintech companies a historic vote of confidence. Announcing the Paycheck Protection Program—forgivable loans for small businesses—in March, Treasury Secretary Steve Mnuchin promised that “any fintech lender will be authorized to make these loans.” Until now, the Small Business Administration had never authorized anyone but traditional banks to offer its government-guaranteed loans.

But like so many other aspects of the PPP program—starting with the expectation that the loans would go to small businesses, as opposed to public companies—the Trump Administration’s promises have not materialized. By the time the SBA’s funding for the program ran out last Thursday, no “fintechs actually did any lending directly to the PPP,” according to Scott Stewart, CEO of the Innovative Lending Platform Association, an industry group for fintech startups.

“Unfortunately, the funds for the program were exhausted prior to us being able to accept applications,” a spokesperson for OnDeck, the nation’s leading non-bank online small business lender, told me when I broke the news late last week. Indeed, the SBA did not approve a group of fintech lenders, including OnDeck, to make PPP loans until late on Tuesday, April 14, leaving only a day before the money dried up—and not enough time to obtain the necessary credentials from the SBA to actually begin lending.

Still, fintech companies were holding out hope that Congress would replenish PPP funding this week, and that the new bill would set aside a portion of the money for the type of lending in which fintechs specialize: loans of $50,000 or less, intended for the smallest of small businesses. Those are the businesses whose days are increasingly numbered as long as the economy remains shuttered amid the pandemic. “This is, for them, oxygen,” says Eyal Lifshitz, CEO of BlueVine, of the small loans his company offers. (BlueVine also received SBA approval to be a PPP lender late last Tuesday, but has yet to begin directly making the loans.)

The new bill the Senate passed Tuesday, April 21, providing $310 billion in additional funding for the PPP, does carve out $60 billion intended for particularly small businesses. But the wording excludes fintech companies from actually lending out any of that money: The bill specifies that those funds are “set-aside for insured depository institutions, credit unions, and community financial institutions” to lend. Of such institutions, those with assets between $10 billion and $50 billion—in other words, small banks and credit unions—will get to lend half the money, while even smaller institutions, those with assets under $10 billion, will get to lend the other half.

Because fintech lenders, unlike banks, do not take deposits—what the Treasury Department calls non-bank, non-depository institutions—they get no special recognition in this bill. That sets up something of a free-for-all for both fintech lenders and the small businesses they serve, forcing them to compete head-to-head with big banks—who tend to lend to businesses on the larger end of the spectrum—for the remaining money, if this bill becomes law, as is expected.

The good news is, the fintech lenders that received SBA approval last week are ready to hit the ground running and lend as soon as the new PPP money is released. “We’re going to prove after all this is over, that we are fully capable of operating government-guaranteed programs,” Ryan Metcalf, head of U.S. regulatory affairs for Funding Circle, a U.K.-based fintech lender, told me last week.

The bad news is, the new money may not even last a week—and the question remains as to how much of it, if any, the fintechs will get to lend.

Jen Wieczner

@jenwieczner

jen.wieczner@fortune.com

DECENTRALIZED NEWS

Credits

Leaks may show a Google credit card to rival Apple's ... Coinbase hires Barclay's vet Brett Tejpaul to head institutional efforts ... PayPal and Andreessen Horowitz to mentor blockchain startup camp ... Denmark bars companies headquartered in tax havens from receiving bailout money ... U.S. Senate approves additional $310 billion in small business emergency loans.

Debits

Facebook's Libra project curtails some of its ambitions ... Coronavirus is stopping the vital flow of physical cash for remittances ... Hackers exploit dForce, a decentralized finance tool, for $23 million ... Then return some of the stolen crypto when they can't sell it ... Stripe may be recording your movement across the web ... Developers behind a wallet for the EOS blockchain conduct $52 million exit scam.

FOMO NO MO'

Why do we not have these things? Medical equipment and financial conduits involve no rocket science whatsoever. At least therapies and vaccines are hard! Making masks and transferring money are not hard. We could have these things but we chose not to — specifically we chose not to have the mechanisms, the factories, the systems to make these things. We chose not to *build*.

Investor, Netscape cofounder, and early Bitcoin believer Marc Andreessen, from "IT'S TIME TO BUILD," an essay calling for renewed U.S. investment in hospitals, factories, schools, housing, and, yes, payments systems. Andreessen connects America's broadly inept response to the coronavirus to its lack of investment in infrastructure, broadly conceived. The essay resonated far and wide—possibly because it forms a rationale for maintaining venture-capital investment flows during the coming downturn.

Honorable Mention: Wired Magazine's profile of Cloudflare cofounder Lee Holloway, and his rare degenerative cognitive disorder, may be the most profound thing you read about a tech founder this year.

BUBBLE-O-METER

-$37.63

The price, at market close Monday April 20, of a barrel of West Texas crude oil for May delivery. The squeeze was triggered by a sometimes-inconvenient aspect of oil futures contracts: Someone eventually has to take physical delivery of all that black gold (or maybe, these days, bronze). The unexpected plunge in global oil demand amid widespread coronavirus shutdowns means that in the short term, demand for oil is far lower than supply, and storage until demand returns isn't free.

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MEMES AND MUMBLES

If Marc Andreessen wants to build, he should consider even the most adventurous ideas, such as a new economic system in which humans serve crabs.

On an unrelated note, the Ledger team is definitely not made up of giant intelligent crabs masquerading as humans. That would be absurd.

This edition of The Ledger was curated by David Z. Morris. Contact him at david.morris@fortune.com.