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The Paycheck Protection Program (PPP) funds have been exhausted. In less than two weeks, $349 billion has been claimed by around 1.6 million small business owners. While that may seem like a lot, 1.6 million is a mere 6% of America’s small businesses. This means 94% of small business owners, many of whom have applications pending with lenders, have been left to fend for themselves.

There has been a lot to learn over the past two weeks as a nation, as an industry, and as business owners. It’s important to take a closer look at the Paycheck Protection Program, and most importantly, what needs to be done next.

From the get-go, this program was ambitious. Financial institutions, small business owners and government agencies alike knew there would be challenges, delays and failures. But with less than a week’s notice (and fewer than 12 hours to build the final application) financial institutions around the country created some semblance of a formal process and began accepting applications.

To put this into perspective, in all of 2019, the SBA processed 60,000 loans. Somehow, that was accomplished in less than 14 days.

It became apparent fairly early on in the program’s launch that many segments of small business owners may find themselves with nowhere to turn. Big banks, if they participated in the program at all, prioritized their customers first. Small business owners without a prior relationship with an SBA-approved lender began to feel left in the cold. Many of these businesses turned to online marketplaces and non-bank SBA lenders.

For the program as a whole, the average PPP loan size was just under $240,000. For business owners who came to fintech lenders, the average was just over $82,000—one third the national average. This is due to the fact that fintech lenders’ super power is processing smaller loan amounts at a higher volume. Community banks, on the other hand, specialize in processing large amounts at a lower volume; this is not what Main Street needs right now.

The fact that fintech and non-bank lenders have been approved to participate in the distribution of PPP loans will make a world of difference if and when more funds are appropriated. Small businesses would have benefited more had these lenders been approved earlier in the process (most of them weren’t approved until the money had actually run out), but they can take heart knowing that more high-tech options will be available in the next phase.

In addition, the SBA didn’t approve every FDIC bank and credit union—only those that were SBA-licensed lenders. 

Another problem that plagued many financial institutions around the country was getting “pristine” applications to submit to the SBA. Ever-changing requirements led to many business owners’ applications bouncing back from the SBA. Most lenders found out early on that the PDF application that was released by Treasury was missing a few important data points (date of birth, business start date, and 6-digit NAICS industry code) that were needed to submit the application through E-Tran.

The rules also changed days into the launch of the program about whether a business owner could submit an application to more than one financial institution. This created a lot of confusion and trepidation for business owners who wanted to ensure they followed the guidelines to a tee, while also ensuring they secured a place in line with the fastest-moving loan processor.

What Comes Next?

The priority now is Congress approving additional PPP funds. The increase is already in discussion and has bi-partisan support to some degree, but it is time to get it passed and get these funds into the hands of the nation’s small business owners.

Until then, financial institutions are preparing for the second wave of approvals. Ideally, the SBA will also approve all banks, credit unions, and legitimate fintech lenders to participate in this next round so that those small business customers that were placed at a disadvantage in the first round will become the priority in round two. With SBA’s early E-Tran problem resolved, I am confident the next wave of capital distribution will be much faster. Business owners who did not get funded in the first round should work now to ensure their applications are in pristine condition.