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Wednesday, Dec 31, 2025

PPP Scammers Made Fintech Companies Their Lenders of Choice

PPP Scammers Made Fintech Companies Their Lenders of Choice

In April the Paycheck Protection Program was under fire for moving too slowly and leaving too many people out.
In April the Paycheck Protection Program was under fire for moving too slowly and leaving too many people out. Part of the $2 trillion Cares Act, it was set up to offer forgivable loans to small businesses such as restaurants and hair salons that would help keep them afloat through the Covid-19 lockdowns in the U.S. Banks were initially in charge of administering the government-backed payments. In an effort to distribute the desperately needed money faster, web-based companies were later allowed into the program. Grateful businesses praised their speed.

It turns out scammers found them useful, too.

Financial technology companies handled 75% of the approved PPP loans that have been connected to fraud by the U.S. Department of Justice, a Bloomberg analysis of more than 100 loans at the center of the cases shows. The fintech companies arranged just 15% of PPP loans overall. They include Kabbage and BlueVine Capital, as well as banks and nonbank lenders that work with such companies, including Cross River Bank, Celtic Bank, and Ready Capital.

In many cases, a simple Google or state records search would have suggested an applicant’s business didn’t exist or was dormant. One borrower facing charges allegedly got approval for $3 million from Ready Capital Corp. for a business in Beaumont, Texas, even though the company had no website or presence on social media and the business address provided, according to Google Maps, was for a single-family residence. (Investigators intervened before the loan was funded.) Another borrower in Little Rock, Ark., received almost $2 million from Kabbage Inc. and BlueVine Capital Inc. for businesses that weren’t in good standing with the secretary of state.

Borrower fraud doesn’t mean lenders broke the rules of the program, and they haven’t been accused of wrongdoing. The U.S. let them rely on self-certifications by applicants attesting that they were eligible for the loans. A spokesperson for Ready Capital says it “implemented due diligence measures and complied with SBA directives to expeditiously provide relief to small businesses.” Kabbage and BlueVine also say they took steps to scrutinize applications.

But the need for speed may have had unintended consequences. “The fraud checks didn’t really occur upfront,” says Bill Phelan, senior vice president at PayNet, a unit of Equifax Inc. that helps lenders assess the risk of business loans. “The impetus was to get the money out the door and help businesses survive.”

Bloomberg examined hundreds of pages of filings and cross-referenced them with public records to identify the lenders involved in the criminal cases. The analysis focused on instances in which loans had been funded or approved and the type of lender could be identified.

The cases brought by the Justice Department represent about $175 million in alleged fraud, which is a small fraction of the $525 billion in loans approved through one of the biggest government relief programs in history. But PayNet says that among loans for $150,000 or more, about $20 billion worth—or up to 5%—raise some red flags.

At the start of the PPP, run jointly by the Department of the Treasury and the Small Business Administration, many of the largest banks prioritized existing customers to avoid fraud or money-laundering risk. That left small businesses without a banking relationship scrambling to get money before it ran out.

Emissaries from the fintech sector appealed to authorities, saying they could reach vulnerable businesses. They got the green light on April 14, by which point almost two-thirds of the first round of $349 billion in funding had been allocated. Lawmakers later made an additional $320 billion available. Fintechs dominated that second round, which ended in August. Kabbage, which had never before processed an SBA loan, surpassed megabanks to become the second-biggest PPP lender by application volume, approving funds for almost 300,000 businesses. More than 75% of applications that flowed through Kabbage were approved “without human intervention or manual review,” according to a report from the company. The median approval time: four hours.

A Kabbage spokesperson says data and technology allowed it to conduct “rigorous verification checks” that “go well beyond the minimum requirements issued by the SBA.” Kabbage conducts additional verification analyses after loans are approved but before they’re disbursed.

All over the internet, anxious business owners swapped tips about which lenders had the easiest application processes and which were taking on new clients. Borrowers talked about online lenders approving their loans in as little as an hour. One whose application was processed by BlueVine received SBA approval so fast the person wondered if something had gone wrong.
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