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PPP, SBA, Borrowers


#330
Orders Of Magnitude

Published:

Apr 04, 2020


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Posted In:

PPP, SBA, Borrowers

Published:

Apr 04, 2020


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Fixing an airplane engine midflight seems to be the most appropriate analogy when thinking about the $349b small business lending effort launched by the US government on Friday.

The funding is critical for the 30m US small businesses with fewer than 500 employees. They employ 60m people, almost half of the private workforce. The scale of the funding package for small businesses is orders of magnitude larger than anything before - and a daunting challenge for the SBA, the Treasury, and lenders alike to process and distribute.

For context, the global financial crisis saw 1.8m jobs lost in the first quarter of 2009 and the SBA disbursing over $30b. The jobless rate today is almost certainly higher than at any point since the Great Depression. The New York Times thinks it’s around 13% and rising at a speed unmatched in American history. To combat this the SBA has to disburse $~350b (80x their monthly average) immediately and over the coming days and weeks.

Guidance from the government has been fluid and some banks like Chase and First Republic have paused accepting applications until further clarity. Some venture-backed businesses have yet to hear of formal policies regarding the “affiliation rule”, which initially excluded these businesses but has since shifted to accept them, at least verbally.

As more information and guidance come to light, we have been proactive in keeping people close to us informed. Yesterday we had the pleasure of hosting former SBA Administrator under President Obama, Karen Mills and deputy Michael Chodos for a private conversation with our portfolio CEOs. Moreover, we have published a live document for anyone summarizing key elements of this funding effort.

While there are clearly gaps in this critical process – these magnificent Welsh mountain rams know how to fill a void.

Portfolio News


01
Quovo


FinTech Collective publishes SBA Guidance Document for portfolio companies and the wider community - As the government faces the monstrous challenge of rolling out $349b over the course of 3 months, we're doing our part to keep our community as informed as possible. Read more

Navigating risk in crisis: virtual global compliance roundtable - On Aril 9th, portfolio company Sigma will be hosting a virtual roundtable on COVID-19’s impact on financial crime compliance and broader counterparty risk management considerations. Featured panelists include Robert Werner (former OFAC and FinCEN director), Staci Warden (Executive Director at the Milken Institute), Michael Greenwald (former Treasury Attache to Qatar and Kuwait), and Zachary Goldman (former Treasury and DOD Executive). Register to join here

How $5.3b U.S. fintech Plaid is taking on Europe - Plaid is now active in five European countries, having begun its expansion with the UK, followed by Ireland, France and Spain six months later, and then most recently Holland. Over the last year, it’s also grown its European team to 25 employees - many coming from the US - and is continuing to scale in the coming months. Read more

Microsoft announces Money in Excel powered by Plaid - One of the earliest forms of “fintech” is a budgeting spreadsheet. For years, people have relied on Microsoft Excel to budget and track expenses for their personal finances or businesses, typically copying data over from multiple sources. Read more

Orders Of Magnitude


Paycheck Protection Program borrower application form - up and running - Use this form to apply for the Paycheck Protection Program with an eligible lender. Read more

Small business loan program makes bumpy start - As of around 2:30 pm Friday, 5,979 loans worth about $2 billion had been approved, according to SBA Administrator. Read more

Venture-backed startups can access SBA 7(a) loans - Most lawyers read the affiliate provision in the CARES Act to mean that any VC-backed startup would need to affiliate with all the other startups in that VC’s portfolio. This isn't necessarily true. Read more

Banks stand to make billions from US small business rescue - Banks will receive processing fees, paid by the federal government, for making the loans. The fees will vary with loan size: 5% for loans under $350k, 3% for loans under $2m, and 1% for loans greater than $2m. Read more

The unemployment rate Is probably around 13% - The Labor Department reported hat around 9m people had filed for unemployment insurance over the past two weeks. By contrast, in a healthy economy, fewer than 0.5m people would have done so. Read more

Industry News


Chime pilots way to get $1,200 stimulus checks to users instantly after talks with Mark Cuban - Chime's pilot involved getting payments to 1,000 customers to get the payments Thursday using a feature called SpotMe that typically allows members to go negative in their accounts without incurring fees. Read more

Demand for fintech loans jumps in LatAm - For digital lenders, on one hand, demand has surged for loans. On the other hand, they are already rolling out measures to confront a potential downturn in credit quality. Read more

Ken Griffin’s virus plan now includes an emergency trading site in Florida - Market-maker Citadel Securities opened a temporary Palm Beach trading floor at a hotel while keeping all 24 staff from NY and Chicago on-site. The necessary infrastructure was built in less than a week. Read more

Online lender stops making loans to small US businesses - Kabbage, the online small business lender, has stopped making loans, made big reductions to customer credit lines and temporarily dismissed staff after many of its borrowers have been shuttered by the coronavirus outbreak. Read more

Ant Financial, Vanguard target 900m users with robo-adviser – The companies launched a. mutual fund advisory business in China. The first product is an automated service called “Bang Ni Tou” (Help You Invest), with a minimum investment of at least 800 yuan ($113). Read more

How small businesses can survive the coronavirus outbreak -Small-business owners trying to weather the coronavirus pandemic will face a financial blow that’s likely to be worse than what they experienced during the Great Recession more than a decade ago, says Karen Mills, senior fellow at Harvard Business School. Read more

Small businesses fear hold-ups in $350b rescue program - Getting the $350 billion in loans for small businesses in the record U.S. stimulus package into business owners’ hands before a wave of closures will strain the nation’s network of lenders and regulators as never before. Read more

Tink acquires Spanish account aggregation vendor Eurobits for EUR15.5m - Founded in 2004, the Eurobits platform handles more than 50 million transactions every month across Europe and Latin America for over 50 banks and fintech startups such as BBVA, Santander, Sabadell and Fintonic. Read more

Fintech startups set to soar as pandemic drives consumers online - A newly released report by Finch Capital says that, despite short-term pain, the pandemic will ultimately drive adoption, creating a virtuous cycle for fintech companies through the COVID-19 crisis. Read more

Select Financings


Allset - San Francisco based restaurant ordering and payment platform raised $8.25m in Series B financing led by EBRD (the European Bank for Reconstruction and Development). Read more

Juspay - India based payments startup raised $21.6m in Series B funding led by Vostok Emerging Finance and Wellington Management. Read more

Kyash- Tokyo based digital banking startup has raised $45m in Series C funding co-led by Greenspring Associates and Goodwater Capital. Read more

Lunar - Denmark based challenger bank has raised an additional €20m in Series B funding led by Seed Capital. Read more

Olive - Ohio based healthcare automation startup for HR and finance raised $51m in Series E funding led by General Catalyst. Read more

Rise - UAE based financial products for migrant workers raised over $1m in Seed funding led by Middle East Venture Partners. Read more

Recko - India based AI-powered reconciliation of digital transactions raised $6m in Series A funding led by Vertex Ventures SEA and Prime Venture Partners. Read more

RoadSync - Atlanta based digital payment platform for the transportation industry has raised $5.7m in a Series A funding led by Base10 Partners. Read more

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