Cross River Bank’s PPP Lending Practices Raise Questions

While Cross River Bank had been doing massive amounts of work helping small businesses get Paycheck Protection Program (PPP) loans at the beginning of the pandemic, there are concerns about borrowers who aren’t applying for forgiveness.

The bank has made around $1 billion in fees for handling U.S. aid. After two years doing this work, the firm’s growth led to a valuation of over $3 billion, Bloomberg writes.

But some of the loans are seeing issues, with low forgiveness rates showing that online borrowers might have abused the program. Many borrowers didn’t follow through on paperwork to cancel the debt. That could be a cause for concern: the PPP allows loan forgiveness only when it can be proven that they were used for covering eligible costs.

Those not doing so could potentially be fraudsters, according to a February report from the office of Small Business Administration (SBA) Inspector General Hannibal “Mike” Ware. The government said it’s seen a possible 70,000 fraudulent loans from the program.

Bloomberg says there were 16.4% unforgiven PPP loans for Cross River in 2020, as opposed to 5% of the general program that year; the 2021 loans have seen similar rates.

Cross River says there are many reasons borrowers wouldn’t seek forgiveness, including that they might have forgotten to file so far, and that numbers from watchdogs aren’t necessarily concrete evidence of fraud.

The bank saw success in its early years during the 2008 financial crash, as big banks got out of consumer finance and created a void for online lenders. Then during the pandemic big banks were initially slow to complete loans while they worked on automating their processes.

PYMNTS wrote that Cross River also teamed with SmartBiz, a small-business-focused AI-powered financing platform, to add more ways for small businesses to boost their core infrastructures.

Read more: Cross River Teams With SmartBiz on SMB Financing

The partnership will see Cross River incorporating SmartBiz’s digital application to its tech stack to streamline the process for small businesses to get funding.

SmartBiz’s work uses AI-driven processing to let entrepreneurs access business loans more easily.