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Written by Breanna Hardy
Banks are catching onto blooming financial technology providers (fintechs), which shorten the turnaround time for PPP loans. The burgeoning industry could make banks keep it around for good.
In the first round of PPP, Premier Valley Bank processed loans on their own, but for PPP2, they’re looking into operating with a fintech, which makes the process quicker for customers.
“The second go-around, we think we’re going to handle most of it in-house, but we are going to partner and help process some things,” said Premier Valley Bank CEO Lo Nestman.
Jim Ford, CEO at Central Valley Community Bank, also said they will be looking to partner for PPP2.
Ford currently has a partnership with a fintech to process PPP forgiveness, but not for application processing.
“We’re in the final stages of evaluating whether that would work for us this time around as well, so that we would do both the origination on that portal and the forgiveness on the portal altogether,” Ford said.
Ford says a fintech would save both customers and lenders from emailing or mailing documents back and forth. Customers would instead upload documents to a portal, which ensures customers know their information is uploaded, rather corresponding with several lenders throughout their nine-county territory.
But some community banks are hesitant about fintechs.
“For me and the community banks, it’s a little too much like Wall Street; but it’s always good to know what the competition is doing,” said Dennis Woods of United Security Bank.
Woods says he is open to what his employees think would be efficient. Loan quantity is a major determining factor because of the sheer volume of paperwork and documents being checked and scanned by third party software companies instead of bank employees.
“The actual loan officers need to decide whether that is time saving to them,” Woods said.
Fintechs make money through banks’ payments per customer application processed. Right now with mass lending, it’s a good time for fintechs to approach banks about using their services.
“We have just been solicited by about six fintech companies,” Woods said.
The benefits, Woods said, are that banks don’t have to chase paperwork. He described it as “clerical support,” since they can collect information for you. But the companies can’t decide whether businesses qualify, and some customers need interaction with lenders — and need hand holding through the process.
Steve Jones, chief operating officer at Suncrest Bank in Visalia, said that they are excited to partner with fintechs. He says it allows the bank to focus on their customers’ needs.
“That allows us to conduct our regular business, which we have a lot of,” Jones said.
Under the first draw, Suncrest Bank processed the loans manually, not using a financial technology company.
When their volume became too great the first round, they sent customers to a community development financial institution (CDFI) that uses a fintech.
This led to partnering with SmartBiz Loans, a fintech company. They have since partnered with them to create a U.S. Small Business Administration 7A loan program.
Numerated, a fintech Suncrest Bank partnered with for loan forgiveness, will also assist with PPP2 applications.
“It’s a tremendous amount of efficiency, allowing our markets to continue their regular business rather than stopping and working on PPP,” Jones said.
He also said the process has been self-explanatory for customers, and needed minimal explanation.
“It’s a fairly easy step-by-step process. They’ve likened it to the TurboTax of PPP, so anyone that’s done an online tax software for their own personal taxes will realize it’s a pretty simple fill in the blanks, and it’ll ask you some questions and it processes,” he said.
This may be the era when fintechs come into the mainstream. At their peak, they processed $250 million an hour, and $20 billion in PPP loans the first time.
“We’re excited about partnering with the fintechs and really seeing how we can help our businesses. It definitely complements what we do now,” Jones said.