While Cross River Bank Having done a massive amount of work early in the pandemic to help small businesses obtain loans under the Paycheck Protection Program (PPP), there are concerns about borrowers not seeking forgiveness.
The bank has taken in around $1 billion in fees for handling US aid. After two years of this work, the company’s growth resulted in a valuation of over $3 billion, Bloomberg writes.
However, some loans are experiencing problems as low forgiveness rates suggest online borrowers may have abused the program. Many borrowers failed to follow the paperwork to cancel the debt. This could be a concern: the PPP only allows for forgiveness if it can be shown that they have been used to cover eligible costs.
Those who don’t could potentially be scammers, according to a February report by Small Business Administration (SBA) Inspector General Hannibal “Mike” Ware. The government said it may have seen 70,000 fraudulent loans from the scheme.
According to Bloomberg, Cross River had 16.4% unissued PPP loans in 2020, as opposed to 5% for the general program that year; Loans for 2021 have recorded similar rates.
Cross River says there are many reasons why borrowers would not ask for forgiveness, including that they may have previously forgotten to apply and that numbers from watchdogs are not necessarily concrete evidence of fraud.
The bank thrived in its early years during the 2008 financial crash when major banks exited consumer finance, creating a void for online lenders. During the pandemic, major banks were initially slow to close loans as they worked to automate their processes.
PYMNTS wrote that Cross River has also partnered with SmartBiz, a small business-focused AI-powered financing platform, to give small businesses more opportunities to improve their core infrastructures.
Read more: Cross River Teams using SmartBiz for SME financing
As part of the partnership, Cross River will integrate SmartBiz’s digital application into its tech stack to streamline the process for small businesses to raise funds.
SmartBiz’s work uses AI-driven processing to make it easier for entrepreneurs to access business credit.