The online lender Kabbage has built an app that lets Uber drivers apply for Paycheck Protection Program loans from the Small Business Administration from their phones.
The PPP program was originally created to help small businesses keep paying their employees throughout the coronavirus quarantine, but it was recently extended to independent contractors such as Uber drivers.
Kabbage has made more than 130,000 SBA-approved PPP loans worth more than $3.8 billion through a platform it built just before the program started on April 3.
The company used many of the modules it already built to evaluate, approve and submit a PPP loan application to the SBA to create the app for Uber drivers, including know your customer, know your business, ultimate beneficial owner, anti-money-laundering, fraud and identity checks.
It also used technology Kabbage developers built to apply optical character recognition, or ORCR, to documents attached to the loan applications, such as tax forms. Sometimes the scans of those documents are good and sometimes they’re extremely hard to read, according to Kabbage CEO Rob Frohwein. The OCR technology has to extract data out of those documents, data used in Kabbage's automated lending process.
Kabbage’s system mimics the work of teams of underwriters and document reviewers, including verifying data.
Developing the PPP system “was the most breathtaking several weeks of my entire professional life,” Frohwein said. "It was anarchy and the most incredible thing I've ever I've ever witnessed.”
Though everyone on the project was working from home because of the pandemic, Frohwein said it felt like they were all together. The team had a text thread going throughout the day and videoconference calls at 11 a.m., 4 p.m. and 10 p.m. daily for several weeks.
About 75% of Kabbage's PPP loans go through to the SBA system without human review. The rest require eyes on them, to look at things that seemed unclear.
Uber drivers have already begun submitting loan applications through Kabbage’s program, though the program was only announced Tuesday.
A key difference between what Kabbage does for Uber drivers and what others offer is Kabbage prepopulates the loan application with data from Uber, according to Frohwein. Drivers can apply for loans directly from their smartphones, with much of the information already filled in.
“I think it's a huge step up for the customers to be able to go through a prepopulated application and for us also to be able to understand the data,” Frohwein said. Drivers can also add other sources of revenue besides Uber in the loan document.
“It really does make the process a lot smoother,” he said.
In less than 10 states, Kabbage is not a direct lender and it’s making the loans through Cross River Bank or Customers Bancorp.
In the first round of PPP, independent contractors and self-employed people, a group that includes Uber drivers, were not included. Just before the second wave, the self-employed were allowed to apply. They can receive about two months’ worth of earnings through the program.
According to Frohwein, Kabbage’s average loan size in the paycheck program is $29,000, which is smaller than most banks’ average and far less than the program average, which was $113,000 as of June 7.
Kabbage has also built a loan forgiveness platform. Frohwein said his developers are ready to modify that program if and when legislators streamline the loan forgiveness application for smaller borrowers, as they’re talking about doing.
It’s not yet clear how Uber drivers and other self-employed will qualify for forgiveness. Small businesses will qualify by spending at least 60% of PPP loan proceeds on payroll over a 24-week period. Uber drivers are not on a payroll; the loans may end up being automatically forgiven.
Kabbage itself had a rough March. Some of its customers went out of business, it had to stop lending and it furloughed almost half its staff.
When the paycheck program came along, Frohwein refocused the entire business on it.
Some furloughed employees have been brought back, working from home. The Atlanta company will continue to focus on the PPP until the June 30 deadline. It will also continue building out payment and cash-flow products for small businesses.
Meanwhile, Kabbage forged an agreement last week with MountainSeed, a real estate services provider for banks and credit unions, to give community bank and credit union clients access to PPP loans for their small-business customers in nonurban areas.
