For an industry that habitually fears federal government involvement as the first step toward stifling regulation, the fintech industry has received some very kind treatment from the Biden administration of late. In 2022, the Small Business Administration (SBA) proposed to amend federal regulations to allow fintech startups to access the coveted “7(a)” government-backed loan program, which had traditionally been limited to old-school financial institutions.
Unfortunately for fintechs, the SBA has since received a large amount of pushback from lobbyists representing the banking industry. Amid rampant fraud related to the federal Paycheck Protection Program (PPP) of the COVID-19 era, industry representatives have argued that allowing fintech startups to access still more federal funds could open the door to further abuse of taxpayer dollars.
In a representative example of this industry pushback, Tony Wilkinson, President and Chief Executive Officer of the National Association of Government Guaranteed Lenders (NAGGL), the trade group of traditional government-backed lenders, prompted federal leaders to act quickly to block the opening of 7(a) loans. “Congress will have to take action to slow this down,” Wilkinson said in a statement. “We’re staring at a potential problem. Congress and SBA can head it off or they will have to clean it up.”