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Non-Bank Lenders to the Rescue of Small Businesses, as Big Banks, Struggle to Meet PPP Demand

May 08, 2020 / Nilesh Kumbharkar

  • Ready Capital and Lendio accepted tens of thousands of applications from the smallest of businesses without imposing the strict criteria.

  • $1.3 billion of the $3 billion in approved loans have been funded, according to Ready Capital and Customers Bank.

  • The PPP program provides forgivable loans of up to $10 million to businesses with fewer than 500 employees to cover eight weeks of expenses.

As complaints mounted last month that big banks favored larger businesses over smaller ones in the $3.5 trillion federal lending program for small firms battered by the coronavirus pandemic, two little-known companies emerged as Main Street’s saviors.

Ready Capital, a non-bank lender based in New York City, and its partner Lendio, a small business loan broker, accepted tens of thousands of applications from the smallest of businesses without imposing the strict criteria demanded by large banks, such as having an existing loan with the bank.

But after approving 40,000 loans by April 16 in Round 1 of the Payroll Protection Program – the most of any U.S. lender – most of Ready Capital’s small business borrowers waited weeks for their money as the clock ticked down on their ability to survive.

To date, $1.3 billion of the $3 billion in approved loans have been funded, according to Ready Capital and Customers Bank, which stepped in to finance the loans on April 30 at the request of the Small Business Administration (SBA). Nearly $1 billion came from Customers Bank.

The vast majority of PPP loans are funded two to three days after approval, says Ami Kassar, CEO of MultiFunding, a small business loan advisor. The SBA requires approved loans to be funded in 10 days, but businesses don’t lose the money or their place in line if the deadline is missed. The problem, Kassar says, is that once loans are cleared, borrowers receive a number and aren’t allowed to apply for a loan at another lender.

“These (small businesses approved by Ready Capital) are in total limbo,” Kassar says. “They’re locked in. And they’ve still got to pay rent and make payroll.” 


John Nahas, owner of Sharkys Woodfired Mexican Grill in Los Angeles, says Ready Capital approved his loan on April 16. If he had received it within a few days, he says he already would have rehired many of the 10 or so employees he laid off. Nahas has closed his dining area but maintained about half his staff for curbside service.

“We’re kind of holding on for dear life while everybody else has gotten funded and we’ve been kind of stuck,” Nahas says. He added that he just this week received a closing document to sign from Customers Bank and hopes to get the money within a couple of days.

The PPP program provides forgivable loans of up to $10 million to businesses with fewer than 500 employees to cover eight weeks of expenses as long as the firms retain their staffers or rehire those laid off. The loans are fully guaranteed by the SBA

Kassar says Ready Capital has had good intentions. “People were getting shut out by the big banks and there weren’t many places to go,” he says. Ready Capital “looked like the heroes of Main Street.”

But, he suggests, the firm didn’t have the systems or capital in place to process or fund such a large volume of loans so rapidly. Loan applications must be vetted for fraud and other issues.

Getting these owners the capital they require as quickly as possible is our top priority, and everyone within our company is working tirelessly to achieve this goal.

- Ready Capital

The snag, the company said, is that on April 14, after most applications were submitted, the SBA issued new guidance requiring businesses without employees to submit a document to verify wages.

“This update impacted us and our borrowers the most as we had over 9,000 sole proprietors, requiring us to go back to our applicants and request additional documentation, which contributed to the delays.”

The company added, “We have sufficient capital on hand to fund 100% of all approved loans.”

Ready Capital later said it “utilized our network of external capital sources, including Customers Bank, to help us accelerate the flow of funds into the accounts of small business owners.” Ready Capital is continuing to service the loans.

Sam Sidhu, chief operating officer of Customers Bank, says his company stepped in to finance the loans late last month because Ready Capital didn’t have adequate funding and needed help processing them. Unlike banks, non-bank lenders like Ready Capital can't receive loan funding from the Federal Reserve.

Thousands of loans are now being financed daily, says Sidhu and Brock Blake, CEO of Lendio, the online small business broker, or marketplace, that partnered with Ready Capital. Sidhu says he expects $2 billion of the $3 billion in Ready Capital loans to be funded this week but couldn’t estimate when the remainder would be completed.


Kassar partly blames Lendio for referring so many small business loan requests to Ready Capital. Blake says Lendio sent 30,000 of the 70,000 loan applications it received to the non-bank lender. Lendio also helps process the loans.

But, Blake adds that the current crisis is unprecedented. “Every financial institution has way more demand than they can possibly handle,” he says.

That's providing little solace to borrowers. Martina Hornjak, a real estate broker in Englewood, Florida, got Ready Capital's loan approval April 16 but still hasn’t gotten the money. With her home sales revenue down 75%, she has asked her bank to defer her mortgage payments and canceled her cable TV service. Like Nahas, she received a closing document to sign this week and hopes to have the money in a couple of days.

Meanwhile, she says, “The bills keep coming but there’s no money.”

About Ready Capital

Ready Capital (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services small- to medium-sized balance commercial loans. We specialize in loans backed by commercial real estate, including agency multifamily, investor and bridge as well as SBA 7(a) business loans. Headquartered in New York City, Ready Capital employs over 400 lending professionals nationwide.

About Lendio

Lendio is a free online service that helps business owners find the right small business loans within minutes. With a network of over 75 lenders offering multiple loan products, Lendio’s marketplace is the center of small business lending.
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