PPP’s Crazy Final Days | Inc.com


When the Small Business Administration shuttered the Paycheck Protection Program for all lenders other than community financial institutions earlier this month–three weeks before the forgivable loan program’s May 31 end date–it sent shock waves through the system.

Womply, a loan facilitator based in San Francisco, quickly rattled off a report noting that as many as 1.6 million of its small-business customers would be left out. Numerated, the Boston-based digital lending platform for banks, said it had $1.4 billion in outstanding applications from more than 33,000 businesses that had been started but not yet approved by the SBA. Meanwhile, other lenders worked to scuttle their programs and divert borrowers, even as it remained unclear how much money was actually left. 

Everett K. Sands, the CEO of Lendistry, did the opposite; he doubled down on PPP, even though he didn’t have to. While Lendistry, a Los Angeles-based, tech-enabled community development financial institution (CDFI), was one of the chosen few still allowed to process PPP loans, it was actively working to handle as many as 12 state and federal lending and grant programs. Lendistry didn’t really have bandwidth, says Sands. Plus, he says, “We thought PPP was ticking down.”

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Although the SBA was legally required to set aside $15 billion for community financial institutions–which is an umbrella term for lenders like CDFIs, microlender intermediaries, and minority depository institutions–the agency’s announcement that it would only accept applications from this segment of lenders was jarring for many. The shift was unexpected, even among the CDFI community, says Sands. “We were following the numbers, but in hindsight not as closely as we should have.”

Even so, as soon as Sands realized how many small businesses were left waiting to get a loan–and how few lenders were still in it–he quickly shifted gears. His thinking: “It was a question not about whether we can do it; it’s about what are the small businesses that are left if we don’t do it?”

Of course, redirecting and retraining 10 percent of your staff–on top of the 10 percent already working on the project–while you’re going full speed on other programs was anything but easy. A few things helped, says Sands. For starters, he credits the Urban Investment Group (UIG), a platform within Goldman Sachs that invests in public-private real estate developments and socially motivated companies, for its continued partnership in helping organizations like Lendistry fund PPP loans.

Stopgap funding from UIG became critical to keep the lending pipeline flowing. The Federal Reserve operates a lending facility, dubbed Paycheck Protection Program Liquidity Facility, or PPPLF, to help lending institutions sell small-business loans–and thus take them off the lender’s books so it can make additional loans. But Lendistry still needed money to bridge the gap between approval of a loan and the time it takes to get reimbursed–making the cash from Goldman all the more helpful.

Lendistry also reached out to loan origination partners like SmartBiz, a fintech platform that has strong and targeted customer acquisition capabilities, local chambers of commerce, and government agencies such as New York City’s Department of Small Business Services, to get a better sense of who was still in need. “What we found out was there were hundreds of thousands, which is not what we expected,” says Sands, who says Lendistry fielded about 200,000 PPP applicants to date. 

CDFIs were getting deluged. Since May 4, Opportunity Finance Network, the national association of CDFIs, has seen a significant jump in traffic to its CDFI Locator webpage, with a 3,243 percent increase in users, according to spokesperson Lina Page. “Prior to May 4, the CDFI Locator would typically receive 77 new users per day. In the days immediately following May 4, new users have climbed to 2,574 per day,” says Page.

All told, Sands, who had spent several years working at major banks before founding Lendistry in 2015, estimates his organization will have backed more than $1 billion in PPP loans to 40,000 to 50,000 businesses. That’s notable, considering that most CDFIs tend to operate on a smaller scale, amid a local community.

It’s worth noting that Lendistry itself has grown significantly since the pandemic began. Prior to the crisis, the company had 40 employees, and while it lent nationally, it focused its SBA lending in California. Today, its SBA efforts are national and the organization has 200 full-time employees and another 500 contractors. Sands hopes it will continue to support SBA-backed loans on a national level even after the PPP ends.

In many ways, the pandemic fueled Lendistry, says Sands. But also, he adds, the killing of George Floyd by police in Minneapolis last year helped him focus his ambitions. “When I sat there and watched Floyd and that situation there, I thought: ‘If it had been a Black business owner, would it have been a policy to call the cops over $20?’ Probably not,” he says, adding: “Personally I thought: ‘Am I doing enough, and is Lendistry doing enough to help small businesses succeed?'”

Michael Roth thinks Sands is on to something. As a managing partner at Next Street, a small-business adviser, Roth works closely with CDFIs and giant lenders to help drive more advantageous ecosystems for small businesses and entrepreneurs. “What Lendistry has been able to do is target small businesses in this very high pressured short period of time to create something that looks to me like part of the model of the future of lending,” he says.

Roth also knows of what he speaks. Until late March, when Isabel Guzman was sworn in as head of the SBA, Roth actually helmed the agency. “What’s happening is partnerships are evolving and forming right now that really leverage what the CDFIs do and what fintech has done,” he says, noting that the aftermath carries consequences for future small-business lending. “Lendistry is a lead on that, with Goldman, too.”



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