Kabbage, the Atlanta-based small business lending fintech, was the SBA’s fourth-largest payroll support (PPP) loan processor.
The company has traditionally served small businesses with fewer than 20 employees, often fewer than 10, said Rob Frohwein, CEO of Kabbage.
“We knew that it would be difficult for the very, very long queues of small businesses to access PPP loans,” Frohwein said. “We knew that most banks would focus on their existing lender customers, which are typically larger small businesses or large corporations. “
FinTechs were not allowed to participate initially, so Kabbage partnered with banks as partners, including Cross River Bank since the first tranche of the PPP and ultimately Customer’s Bank in the second, working with over 100 After the Treasury Department invited fintechs to participate, Kabbage applied and entered the second tranche to lend directly to businesses. He also qualified for the Fed’s loan facility so that he could borrow the money to lend rather than wait for repayment.
“We don’t know of any other fintech that is accessing the liquidity lending facility,” Frohwein said.
Kabbage now has SBA approval for 129,000 claims for nearly $ 4 billion. This includes $ 800 million processed for nearly 20,000 small businesses through a partnership with MountainSeed, a nationwide real estate service provider that has 135 community banks and credit unions as customers.
“Thanks to MountainSeed, we are proud to have formed over 135 partnerships with local banks in a matter of days, which under normal circumstances would typically require months or years of planning,” Frohwein said.
“Sometimes you can create the front end and then a bank would have a very manual process on the back end. We were able to complete an automated end-to-end process, so 75% of the applications were processed fully automated, they didn’t have to interact with anyone at Kabbage or manually review the case.
Some apps required manual exception handling if a company uploaded the wrong document or entered incorrect information or if something did not sync correctly, he added. Banks and fintechs that have reached outside of their existing customer base to help businesses secure SBA funding see it as a way to generate new business. (See my story on Atlantic Union)
“At the end of the day, these are small businesses that need help with various aspects of their financial lives,” Frohwein added. “We have other products, but right now we’re completely focused on PPP for these customers, making sure they pass the request and get funding. Once we made sure they were fully taken care of, they expressed a lot of gratitude. It is the first time that many companies realize that there is life outside of the big banks.
Kabbage will also work with borrowers on the loan forgiveness portion of the PPP. Unlike the PPP which had a limited amount of money that was allocated on a first come, first served basis, the loan cancellation will be processed over time and businesses have six months to apply, a good thing as advice is flowing from the Fed and the Treasury, he mentioned.
It has also been a learning experience for community banks, he added.
“We partnered with community banks because many did not have the capacity to implement a solution. I think you’ll see more community banks partnering with fintechs in the future – fintechs can operate anywhere, they can have a presence virtually anywhere in the country. ”
Kabbage is used to working with community banks, he added. Some banks have seen three to five years of fintech acceleration in two to three months, he said. “It really is the speed of fintech. The world is changing very quickly. Sometimes you see community banks partnering up faster than the big banks that think they’ve got it all. “