At the height of the COVID-19 pandemic, the Paycheck Protection Program (PPP) issued by the federal government represented a lifeline for many small businesses struggling to stay afloat amidst shutdowns and staff shortages. Since it started, the program has been under scrutiny and now people who applied to save their small businesses are finding out their loans were not forgiven.
The $953 billion loan program, launched in late March 2020 after the Coronavirus Aid, Relief and Economic Security Act bill passed, was implemented by the U.S. Small Business Association (SBA) and distributed through private banks. In exchange for the loan process and distribution, lenders were entitled to receive fees payable by the SBA.
While the loans became forgivable under specific conditions, an analysis by the Dallas Business Journal found that only in Texas there are $2.8 billion worth of unforgiven loans. The 83,858 unforgiven PPP loans make up nearly 9% of all the loans approved by the SBA in the state.
The report also showed a list of lenders with the most unforgiven loans in Texas. Here are the top 10:
- Cross River Bank - 9,178 loans totaling $215.3 million
- Prestamos CDFI LLC - 8,839 loans totaling $143.2 million
- Capital Plus Financial LLC - 6,506 loans totaling $110.5 million
- Benworth Capital - 6,497 loans totaling $96.3 million
- Kabbage - 5,947 loans totaling $146.9 million
- Harvest Small Business Finance LLC - 5,900 loans totaling $117.2 million
- Lendistry - 5,205 loans totaling $98.2 million
- Fountainhead SBF LLC - 4,872 loans totaling $71.8 million
- Customers Bank - 2,933 loans totaling $55.4 million
- Bank of America - 2,433 loans totaling $148.9 million
As with many loan applications, there are numerous reasons why the loans could show up in SBA’s records as unforgiven: business owners not actively submitting a forgiveness request, owners using the loan to cover other expenses than those eligible for the program, mistakes in the paperwork or simply because the loan was never disbursed by the lender by the applicant’s request or because the bank detected possible fraud involved. Yet the amount of unforgiven loans still needs justification.
In October 2021, a group of borrowers in Pennsylvania filed a class action lawsuit against Prestamos CDFI claiming that the lender failed to distribute PPP loans to SBA-approved small businesses despite processing the loans. Kabbage, a financial technology company that had partnered up with Cross River Bank the lender with the most unforgiven loans in Texas, is also facing a lawsuit over misleading and false information about the PPP loans it provides.