Amid a climate in which cash needs are on the rise, it’s been reported that Kabbage Inc. has abruptly cut off credit to small business customers. Borrowers, who realized the credit lines were halted when they signed onto their accounts, claim the company did not provide them with notice, according to a Bloomberg report.
Georgia-based Kabbage claims it has provided small business borrowers with over $9 billion in loans as of its 2009 establishment. The company has furloughed workers as it deals with decreased spending at small companies.
Kabbage is now said to aim to be an intermediary connecting people with Small Business Administration (SBA) loans. The company also put up a website to assist small businesses with selling gift certificates.
Paul Bernardini, a company spokesperson, said in a statement that was cited by the outlet, “Like many other FinTechs, we have temporarily adjusted our lines of credit and are focused on supporting the SBA’s Paycheck Protection Program.”
Bernardini continued, “Just as manufacturers have retooled their processes to build ventilators and masks, we’re doing the same to reallocate our resources to respond to the national emergency and provide financial products that small businesses need most.”
Digital lenders have promoted themselves as the antithesis of banks for years. However, banks have tapped into their strategy over the last financial crisis by limiting credit access amid a shrinking economy.
Lenders such as Fundbox Inc. and OnDeck Capital Inc. have also made their underwriting standards stricter or restricted lines of credit.
The news comes as it was reported that Kabbage was to furlough a “significant number” of its staff in the United States. The firm was also reportedly “completely” shutting down operations in Bangalore, India. In addition, it was reported that the company’s executive staff would take a “considerable” reduction in pay.