KKR establishes $50m pandemic relief fund, Webster Equity forms gastroenterology platform in all-equity deal, Challenges of getting SBA loans from banks

SBA loans are getting pullback from banks and KKR forms a $50 million pandemic relief fund

Happy Wednesday, Dear Readers!

This is Milana Vinn with your weekly Tech Take.

This has probably been both the most challenging, most fun week for me, personally, since the beginning of the pandemic. My family and I remain in the Poconos, where on Saturday, we took the kids on a hike, caught a salamander and learned how to whistle using a cap from an acorn. The challenging part has been educating three kids remotely while also getting work done. If anyone has figured out how to manage both, please share! Send me your tricks and tips to mvinn@buyoutsinsider.com.

Fintech take on SBA loans

I recently got caught up with Levi King, chairman and founder of Nav, a fintech company that provides customized financing options for small businesses. The company, which is backed by GS Growth Equity and venture investors, works like Credit Karma for corporates: it uses companies’ credit and business profiles to come up with the best loan options for a given business.

Nav has been ahead of the curve to act on the CARES Act. The company created the first digital calculator that allows small businesses to estimate the amount it can receive in SBA loans under the Payroll Protection Program. Nav also created a digital application system for SBA loans on its website, so any small business owner eligible for financial relief under the CARES Act can apply online on Nav’s website. Fintech companies Lendio and Fundera are now offering this service too.

Nav has received $14 billion in loan applications in just three days, but according to King, nobody would accept them.

“We haven’t found a single bank willing to take a single one of our 1.2 million customers,” King told me in a recent conversation. “Banks are not trying to get new customers; they don’t want any new traffic from people like us.”

Risk takes over
Why? Well, one reason is risk. Bank of America, for example, is only taking SBA loan applications from small business customers with existing outstanding loans with the bank.

“Banks are risking their customers defaulting on their loans so they want to make sure they are subsidizing their potential losses,” King said. “It’s not fair; it should be that all small businesses have equal access to these funds, but the banks are the getaway.”

Meanwhile, Wells Fargo announced Monday it has stopped accepting SBA loan applications from small businesses due to its asset cap imposed by the Federal Reserve in 2018. The bank said it will distribute only $10 billion in loans and will now focus on lending to nonprofits and small businesses with fewer than 50 employees.
That means that Wells Fargo’s other small business customers have no bank to turn to for an SBA loan, as no banks are accepting applications from non-customers.

Nav is eligible for the SBA loan itself and plans to apply, King told me. But for now, neither Nav, nor any of its customers, are able to receive the funds or even access a bank to take their application.

What is your experience with the SBA loan application? I am eager to hear your stories – successful or not. Stay tuned for more coverage on the CARES Act and its paycheck protection program on PE Hub.

Top Scoops
Here’s an update on firms doing good amid the pandemic. KKR senior executives and the firm pledged to establish a $50 million relief fund to support communities and its employees impacted by the coronavirus outbreak. KKR’s four senior executives, Henry Kravis, George Roberts, Joseph Bae and Scott Nuttall will forego further salary and bonuses for 2020. Read it here on Buyouts.

Webster Equity Partners agreed to make an about $22 million equity investment in Gastro One to establish a gastroenterology platform, writes Sarah Pringle on PE Hub. Webster will reserve up to $80 million for the new platform, Sarah writes. The deal was structured without bank debt, she writes. Check it out here.

As always, write to me at mvinn@buyoutsinsider.com with any thoughts, tips, ideas, or just to say hello.