The Financial Technology Association is backing a bill that would clarify that loans made through the Small Business Administration’s flagship lending program can be used to pay for fintech services.
Small-business owners are increasingly relying on digital financial tools to help them manage spend, process payments, track payroll expenses, and handle other administrative tasks, according to the Financial Technology Association.
That’s why the trade group, which represents 26 fintechs, says it is backing the Small Business Technological Advancement Act, a bipartisan bill that would clarify that loans made under the Small Business Administration’s 7(a) program can be used to help cover the fees associated with fintech services.
“The SBA lending program is known primarily as a way to access capital,” said Miranda Margowsky, the FTA’s head of communications. “But this bill really recognizes and calls on the SBA to clarify that there are a range of other digital financial tools that are important to small businesses.”
Small businesses that use a large number of digital tools are more likely to report recent revenue growth, according to a survey released by the Bipartisan Policy Center last year.
The report found that 84% of small businesses that use six or more technology platforms saw an increase in profits.
While fintechs can help small businesses scale and compete with larger firms, the fees associated with their services can be a hurdle for entrepreneurs, according to Sen. Todd Young, R-IN, who, along with Sens. Jacky Rosen, D-NV, Ted Budd, R-NC, and Jeanne Shaheen, D-NH, introduced the SBTAA in July.
“Technological advancements have created opportunities for small businesses to tap into the digital economy and expand their customer base. However, the high upfront and ongoing costs associated with these technologies can pose financial challenges,” Young said in a statement.
Margowsky called the SBTAA a “simple, common-sense fix” that represents a larger effort to modernize the way the SBA serves small businesses.
“It really acknowledges the digital reality and the needs that small businesses have today,” she said. “Basically, there’s nothing that calls out digital tools right now in the SBA 7(a) program. This really provides clarity that a small business owner that is applying for funds can use those to cover some of these tools that are really critical for the businesses of today.”