Foreign Governments Working with Fintech to Distribute Aid to SMBs

Governments are looking to fintech platforms as way to effectively adjudicate and distribute aid to small businesses. Below are examples of how foreign governments are working with fintech and on what terms.

 

 

USA:

Paycheck Protection Program (PPP) asks lenders to underwrite based on whether the borrower was in operation on Feb 15, not on based credit worthiness. A full list of lenders participating found: here.

Requirements for participating non-bank lenders. See form here:

  • Must already originate, maintain, and service business loans or other commercial financial receivables and participation interests.
  • Have already originated, maintained, and serviced more than $50 million worth of business loans or other commercial financial receivables during a consecutive 12 month period in the past 36 months, or is a service provider to any insured depository institution that has a contract to support such institution’s lending activities in accordance with 12 U.S.C. Section 1867(c) and is in good standing with the appropriate Federal banking agency.
  • Have already been in compliance with the Bank Secrecy Act since at least February 25, 2019, even if the lending entity is not regulated under this Act. This means:
    • An anti-money laundering (AML) compliance program equivalent to that of a comparable federally regulated institution, which may include:
      • customer identification program (CIP)
      • beneficial ownership information collection requirements
    • Alternatively, if available, entities may rely on the CIP of a federally insured depository institution or federally insured credit union with an established CIP as part of its AML program.

Underwriting requirements:

  • Confirm receipt of borrower certifications contained in Paycheck Protection Program Application form issued by the Administration
  • Confirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020
  • Confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application
  • Follow applicable Bank Secrecy Act requirements.

Borrower terms:

  • Up to $10m / borrower
  • SMBs with < 500 employees

Incentives to participating lenders:

  • PPP is 100% guaranteed by SBA
  • Lender may charge origination fee depending on loan size
    • 5% on < $350k
    • 3% on < $2m
    • 1% on > $2m
  • Principle eligible for forgiveness

 

AUSTRALIA:

Coronavirus SME Guarantee Scheme’s goal is to enhance lenders’ willingness and ability to provide credit up to 40b in loans.

Incentives to lenders:

  • 50% guaranteed by government
  • Providing AOFM (debt department of Australian Treasury) with $15b to invest in the wholesale funding of lenders

 

UK:

Coronavirus Business Interruption Loan Scheme (CBILS) is open to accredited lenders, which will include fintechs.

Borrower terms:

  • Up to £5m / borrower with 6 year repayment terms

Incentives for lenders:

  • Government covers the first 12 months of interest
  • 80% guarantee on principle backed by government
  • Program cannot account for more than 75% gross of lender’s annual lending
  • Must deploy at minimum £1m through program

 

HOLLAND:

The SME Loan Guarantee Program (BMKB) is applicable to bridging loans and overdrafts with a term of up to 2 years. The Ministry of Economic Affairs and Climate has opened the BMKB to non-bank funders.

Borrower terms:

  • € 1.5 million / borrower
  • SMBs with < 250 employees

Incentive for lenders:

  • 90% guarantee by government

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