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April 17, 2020

CT inks deal with fintech firm to handle $50M bridge loan program

HBJ Photo | Sean Teehan Department of Economic and Community Development Commissioner David Lehman (center) and Gov. Ned Lamont.

The state has inked a deal with an online lending company, which will help administer a $50-million bridge loan program that was overwhelmed by a sudden influx of applications from companies desperately looking for a financial lifeline amid the COVID-19 health and economic crisis.

The name of the online lending company wasn’t immediately available, but it will be revealed later this afternoon, said David Lehman, commissioner of the state Department of Economic and Community Development. 

The financial-technology company was one of three firms that responded to a hastily-put-together request for proposals and will help process and vet loan applications and pay out the money. The vendor has agreed to provide the service for free, creating a significant cost savings to the state, Lehman said.

The goal is to have loans in the hands of businesses by the end of this month, he added, noting he realizes time is of the essence to get cash in the hands of companies facing declining revenues as significant parts of the state’s economy remain shutdown to prevent the spread of COVID-19.

“We are super sensitive to timeframe,” Lehman said Friday morning. “Given the overwhelming response, our intention is to make thousands of loans by the end of this month.”

DECD announced the bridge loan program in mid-March and received 5,200 applications within 48 hours of it going live late last month. 

Processing that many loan applications is a huge challenge and DECD and Connecticut Innovations -- the state’s quasi-public venture arm -- aren’t able handle it if they want to get money out quickly to businesses starved for cash, Lehman said.

The online lender will help process, underwrite and eventually disburse the loans to eligible companies.

No loans have been issued, Lehman said, however, some applications have been rejected because they don’t meet the program’s basic standards. 

The loan program originally had only $25 million allocated, but that amount was doubled after it was inundated with applications.

The program allows a maximum $75,000 loan that carries a 0% interest rate, however, because of the high application volume it’s likely the state will be giving out smaller loans so it can provide capital to more companies.

“Our inclination is to get more loans out at potentially smaller balances and reevaluate where we are and where federal stimulus programs are,” Lehman said, adding companies are more likely to see $15,000 or $20,000 loan, though a decision hasn’t been finalized.

DECD and Connecticut Innovations did add additional staff to process applications for the program, but there is a need for a more automated system, Lehman said.

To qualify for the loan program, eligible Connecticut businesses must have 100 or fewer employees and have been profitable prior to March 10, with no adverse personal credit reports 60 days past due for the last six months. Borrowers must make personal guarantees for the loans, and a credit score is required.
In addition, no real estate, multi-level marketing, adult entertainment, cannabis or firearms companies will receive the loans, DECD said.

The loans will have a term of 12 months, with the possibility for a six-month extension.

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