Kabbage participated in PPP lending by adjusting its strategy – Houston Business Journal – The Business Journals


When the U.S. Small Business Administration rolled out the Paycheck Protection Program, it caused many lending institutions to scramble to get funding into the hands of small businesses quickly.
Kabbage Inc. was able to pivot its strategy quickly to participate in the PPP by automating the process for its customers. The financial services company, which is based in Atlanta, processed 3,436 Houston-area PPP loans under $150,000, ranking it No. 7 in that category, and 85 local PPP loans over $150,000, according to a Houston Business Journal analysis of SBA data through June 30. For loans across all size categories, Kabbage was the No. 8 lender in the Houston area.
Overall, the company has processed more than 227,000 PPP loans, totaling just shy of $6 billion. 
Kabbage provides small businesses automated cash flow solutions, including its online lending platforms that allows small businesses to access lines of credit. The company declined to disclose its annual revenue. 
Kathryn Petralia, co-founder of Kabbage, said that many lending institutions don’t automate small business loans.
“I always say this about traditional institutions: The spirit is willing, but the flesh is weak,” Petralia said. “They really want to serve these customers, and they really want to automate, but there is a lot of risk inherent in very small businesses. You do have to invest in technology and automation.” 
Petralia spoke with the Dallas Business Journal about participating in the PPP.
What was it like working with the PPP? We frankly ran down as many paths as possible to be able to deliver this capital to small businesses. We partnered with banks. We became a lender ourselves in the system. We did all the things that you might expect in order to be able to deliver this capital to small businesses. What we also did at the same time is we automated the origination process for the PPP loans. That’s something that we had never worked with before. We’ve never done an SBA loan. 
Were you worried about risk and fraud while participating in the PPP? We’ve never known our customers in-person because we’ve always been a digital business. We’ve never had brick-and-mortar locations. We (have) never met our customers in person. We had a lot of tools already in place to help us manage that from a fraud perspective. … All of the identity verification that takes place for traditional institutions we do online and we do it in an automated way. We were able to bring all of that to bear to serve these customers.
It’s important to note that fewer than 10 percent of the customers we served with PPP were actually existing Kabbage customers. Very few of our existing customers came to us for PPP, which meant we had to verify them. What you found happening was the banks (participating in the) PPP, they were serving customers that already had lines of credit with them because they’d already verified them.
What are the challenges with the PPP loan forgiveness portion? We don’t have final guidance yet. We believe there’s going to be more specific guidance about verification. We also think there’s going to be some guidance around blanket forgiveness for loans under a certain amount. … I don’t know what the number will be, but we are all anxiously awaiting the release of this guidance.
This interview has been edited for brevity and clarity.
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