PPP: More Than $7M Went To Fake Businesses
A recent investigative report by ProPublica, a nonprofit organization dedicated to investigating abuse of power, has shown that 378 small loans totaling more than $7 million went to bogus companies through the Paycheck Protection Program, faux farming operations being the most common registrations.
The Paycheck Protection Program was launched in March 2020 to help small businesses struggling due to the COVID-19 pandemic. These potentially forgivable loans were meant to help employers keep their employees on the payroll even if the company wasn’t doing so well financially or wasn’t eligible for other small business loans with favorable interest rates.
The Small Business Administration estimated that it had provided loans for more than 55,000 businesses. However, in the same report, SBA stated that approximately 43,000 small businesses took larger loans than their payroll could explain or justify. However, it took an investigation from ProPublica to show that there were even more severe irregularities.
Kabbage, the online lending platform which processed nearly 300,000 PPP loans (with only Bank of America processing more), has come under scrutiny following the ProPublica report. Many of the 378 fake applicants who applied for the loan via Kabbage obtained close to the maximum loan amount for sole proprietorships. “Beefy King,” one of these companies, held the address of Long Beach Township Mayor Joe Mancini. Mancini said that he had never applied for the loan or received any PPP money.
As ProPublica stated in its article, “In some cases, these problems would’ve been easy to spot with just a little more upfront diligence - which the program’s structure did not encourage.”
SBA and Kabbage are currently under a lot of pressure, as the federal investigation is underway and is pursuing lenders to determine where these misallocated loans ended up.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.