Online lender Kabbage is partnering with a "technology-enabled bank" to begin offering Small Business Administration (SBA) loans through the $350 billion Paycheck Program Program (PPP). 

"We've known this bank for a long time. We have just not worked directly with them previously," said Kabbage co-founder Kathryn Petralia, who declined to name the bank, but added the institution is expected to make its own announcement soon. "They're a very tech-enabled, tech-forward institution, and they were able to move really quickly."

Kabbage will also apply to become a direct lender for the SBA loans, Paul Bernardini, Kabbage's head of communications, told Banking Dive. Fintechs and other nonbank lenders are still awaiting guidance from the Treasury on how to offer the loans to small businesses directly. 

Sen. Marco Rubio, R-FL, one architect of the PPP, tweeted Saturday that "multiple fintechs, including PayPal and other online lenders, are ready, able and willing to process” PPP loans, but "they need Treasury to release [the] application for nonbank lenders." Rubio added he expects that paperwork to roll out this week.

The SBA has committed to a "quick review" of the applications for nonbank lenders, Petralia told Banking Dive.

Banks have processed $71 billion loans for 265,000 small businesses since the program’s launch Friday, SBA officials said Tuesday.

The PPP is part of the U.S. government’s $2.2 trillion coronavirus relief package and is meant to help small businesses struggling amid the coronavirus pandemic. 

The program, however, has had a rough start, plagued by overwhelming demand and a lack of clear guidelines, some bankers said. 

Kabbage has received more than 37,000 PPP applications, representing more than $3.5 billion, the company said.

The lender, which has been lobbying Congress for the chance to help in the SBA’s loan program since the start of the coronavirus crisis, has also had to retool its own business model due to the impact of the pandemic. 

In a blog post last week, Kabbage CEO Rob Frohwein said the company "officially paused Kabbage lending on Sunday, March 29 as we needed time to restructure our systems and teams to prepare to deliver billions of dollars of aid through the Paycheck Protection Program."

Kabbage is dealing with the loss of loan origination revenue, as well as losses on the performance of existing loans, according to the Financial Times. 

"We are always on the side of small businesses and believe strongly that these funds are absolutely the best financial product for them right now," Frohwein wrote. "As a result, we made the logical, responsible and ethical choice to convert all our efforts to aid the Small Business Administration in this enormous task." 

The decision to restructure allows the company to make the biggest impact amid the crisis, Petralia said.

"Like the way manufacturers are shifting their business to make ventilators en masse, we had to change our apparatus, as well," she said. "That was a lot of effort, and our folks truly were tireless in their work to retool our platform to be able to accommodate these types of loans."

Like many other companies reeling from the economic disruption caused by the pandemic, Kabbage has had to furlough a "significant number" of its U.S. team of 500 employees, according to an internal memo seen by TechCrunch. The Atlanta-based lender also shut down its office in Bangalore, India, while executive staff members took a "considerable" pay cut.

But the company has since been able to bring back some staff as it refocuses on delivering PPP loans, Petralia said. 

Some banks have prioritized existing customers in processing the loans. But Petralia said that won't be the case with Kabbage.

"That is happening with some large institutions. The reason behind that is not because they're trying to be jerks or favor their own customers, it’s because it's really hard to verify business identity," she said. "One of the biggest risks we have in this program is fraud because whenever there's a crisis, the bad guys are always out in force."

Petralia said many banks are not set up to handle the demand for loans brought on by the crisis and are limiting the loans to existing borrowers who have already gone through the required know-your-customer identity checks.

"A lot of these banks always relied on manual processes and interviews in the bank branch, and we're in this really extraordinary time where nobody's going into any bank branch," Bernardini said. "Everything has to be online, everything has to be digital. And that's something we've been specializing in over the past 10 years."

More to come

Treasury Secretary Steven Mnuchin asked Congress for an additional $250 billion for the PPP program Tuesday, and Senate Majority Leader Mitch McConnell, R-KY, said he hoped to pass the cash infusion through the Senate on Thursday, according to The Washington Post. 

Rubio has also requested the program be replenished with additional funds. 

"The fear that #PPP will run out of money is creating tremendous anxiety among #SmallBusiness," he tweeted Tuesday. "We have days, NOT weeks to address this."

Petralia said she is hopeful the additional funds will be approved, adding that the fintech is capable of processing billions of dollars.

"We can serve hundreds of thousands of small businesses to the tune of many billions of dollars, measured in tens of billions, not single billions," she said.