Only a handful of fintech companies have been approved as SBA lenders and before they were approved, could still participate, but only as partners, or “agents,” who connect borrowers with banks. While lenders were entitled to a 5% fee on loans under $350,000, agents were limited to a 1% cut of that fee.
Fintech companies account for 33% of all loan applications, according to a Federal Reserve small business survey carried out in the second half of last year, but they almost didn't make the cut in the federal relief program. Early versions of the bill limited the program to banks that were already approved as SBA lenders, but fintech companies ultimately were included after a last-minute flurry of lobbying by the industry. Small business lending is an area of high growth for payment services companies, as startups in the tech sector and in other industries turned to fintech firms for financing in lieu of banks. Square Capital, the division of Square that provides business loans, reported that it originated 97,000 loans in the fourth quarter for a total of $671 million, a 42% increase from the previous year.