As PYMNTS reported in May, “The average business has in excess of $10,000 in monthly expenses and barely enough cash on hand to survive a month, according to the National Bureau Of Economic Research (NBER).” Seems bleak, or at least bleaker two months ago.
Phased reopenings were seeking their level, however, as the nation readied for the July 4 holiday weekend with an odd mix of enthusiasm and angst. There’s undeniably a whiff of optimism on the summer breeze, but one thing that could dampen it is slow-moving money.
“The COVID-19 pandemic is still heavily impacting the global economy, with consumers and businesses in countries including the United Kingdom and United States struggling to stay afloat amid high unemployment rates and declining revenues,” according to PYMNTS’ July 2020 Disbursements Tracker® done in collaboration with Ingo Money.
“The U.S. Internal Revenue Service (IRS) has encountered frictions when attempting to send out stimulus payments to waiting consumers. Approximately 130 million paper stimulus checks have been mailed to individuals thus far, but many have come with problems, including misspelled names or lengthy wait times, which adds to consumers’ existing financial stresses.”
That’s simply not cutting it, and private sector players are stepping in with fast rails, mobile apps, APIs and automation more suited to fluid needs of merchants and FIs after COVID.
‘The Waiting Is the Hardest Part’
It was generally taken as good news when, on June 3, the PPP Flexibility Act was passed, addressing borrower issues and modifying Paycheck Protection Program terms. But passing the bill and actually disbursing funds are separated by an ocean of systemic inefficiencies.
“The amount of time it takes SMBs to actually receive funds offers another challenge, especially when many government disbursements are still issued via check. Providing digital access to funds is proving to be essential for the future of the lending industry, and many are responding by launching new products to meet this need,” per the July Disbursements Tracker®.
“[If] an SMB is forced to wait on delayed funding from a loan, this slowdown not only affects payroll but could also impact the timing of payments made to their vendors — vendors who are also likely impacted, cash-strapped SMBs,” Drew Edwards, CEO at Ingo Money told PYMNTS.
“It is easy to see how this creates a downward spiral for the affected businesses. During situations like [the] COVID-19 [pandemic], where the need for working capital is underscored, prioritizing an instant, digital payments strategy is of the utmost importance. Digitization not only helps minimize the spread of the virus but [also] gets funds in the hands of SMBs at a time when they need it most.”
Lenders Lean Into Digital Access
Increasingly, the answer lies in solutions like automated authentication and access to digital onboarding. When time is the enemy, faster payments are the best friend for small and medium-sized businesses (SMBs).
“Enabling digital access to loan applications is just one step in ensuring SMBs can access the funds they need to weather the pandemic,” the Tracker states. “Marrying the security required by the U.S. Small Business Administration (SBA) with the instant funds access that SMBs facing financial downturns need is a top challenge for today’s lenders.”
“Innovating to support faster disbursements that do not rely on checks is thus dependent upon the swift reception of funding. This means lenders must be ready to adjust their fund approval and disbursements processes. They may well determine that even digital disbursement methods such as ACH payments are no longer swift enough to fulfill SMBs’ needs. Exploring instant disbursement options paired with online tools and platforms that can expedite the loan approvals could be one way to provide the speed SMBs need to survive.”
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