How One Small Player Beat Out PNC, Wells Fargo and M&T for PPP Loans

Banks took center stage in the U.S. government’s signature pandemic aid package for small businesses, the Small Business Administration’s Paycheck Protection Program.

But into year two of the program, a nonbank has emerged as one of the top three PPP lenders. The SBA listed Itria Ventures, a subsidiary of the online commercial lending platform Biz2Credit, on Feb. 28 as the No. 3 lender in dollar value in 2021, after JPMorgan Chase & Co. and Bank of America Corp. Not only that, it was the No. 1 lender, of the top 15, in terms of total loans approved. Itria Ventures was the direct lender for 165,827 approved loans in 2021 worth $4.76 billion. Unless Congress extends the program, it runs through the end of March. The SBA updates PPP statistics every Monday so the ranking could change.

As of Feb. 28, the SBA approved $678.7 billion in low-interest PPP loans this year and last year. The potentially forgivable loans have created enormous opportunities for banks to connect with small businesses and allowed financial technology companies to make inroads into the commercial loan market.

But the significance of an obscure-sounding online marketplace lender surging past the likes of household names such as PNC Financial Services Group, M&T Bank Corp. and U.S. Bancorp for PPP dollar volume and loans wasn’t lost on Joel Pruis, a senior director for Cornerstone Advisors.

The PPP gave a much-better opportunity to these fintech companies to get involved and it gave them the volume,’’ he says. “Prior to this, it’s been tough for them to get any type of material volume.”

During the pandemic, small businesses such as restaurants and retail shops that rely on fintech lenders fell on tough times, hurting platforms that then experienced double-digit loan delinquencies in some cases. OnDeck, a prominent online lender valued at about $1.3 billion during its initial public offering in 2014, sold to Enova International last year for about $90 million. Online direct lender Kabbage sold most of its operations for an undisclosed sum to American Express Co. last year.

Biz2Credit received some negative press last year as a merchant cash advance lender that sued some of its New York borrowers struggling during the pandemic. But the company is moving away from merchant cash advance products because the customers of those loans are small businesses struggling the most right now, such as restaurants, says Biz2Credit CEO and co-founder Rohit Arora.

Biz2Credit, which is privately owned and doesn’t disclose financial information, pivoted last year to quickly ramp up its PPP lending platform and partnerships, hoping to capitalize on what Arora anticipated would be a huge government rescue package. It generates business through referrals from the American Institute of Certified Public Accountants and its relationship with payroll provider Paychex, which has strong connections with small businesses.

It also white-labelled its PPP platform to banks and other lenders to process small business loans without the hassles of the paperwork and monitoring. Among its customers are major PPP lender Portland, Maine-based Northeast Bank, the 11th largest PPP lender in terms of dollar value as of Feb. 28.

Other technology companies seeing a surge in business due to PPP include Numerated, which provides a commercial loan platform for banks. Numerated processed nearly 300,000 PPP loans for more than 100 U.S. lenders, totaling $40 billion as of March 1. Cross River Bank, a technology-focused bank in Fort Lee, New Jersey, that works with fintech companies to offer banking services, also rose in the ranks of direct PPP lenders this year. The $11.8 billion bank ranked fifth with $2.5 billion in PPP loans.

Arora says the SBA’s constantly changing documentation, error codes and program rules were a headache for a bank but fit into Biz2Credit’s area of expertise as a technology company. It provided banks with one platform for both PPP origination and loan forgiveness, simplifying the lending process. Given the amount of work involved, Pruis says banks that chose to handle PPP lending on their own platforms have had a tough time, especially in the program’s first round of the loan program. “It was brutal,’’ he says.

Arora says Biz2Credit is perfectly suited for PPP for another reason: Most of its loans go to very small businesses, many of them sole proprietorships or operations with fewer than 20 employees.

These borrowers often don’t have a business banking relationship, pushing them into the arms of online lenders or small banks.

Small businesses have been especially hard hit by the pandemic. The Federal Reserve’s Small Business Credit Survey for 2021 found that 53% of respondents in September and October of 2020 thought their revenue for the year would be down by more than 25%. Of the 83% of firms whose revenues had not returned to normal, 30% projected they would be unlikely to survive without additional government assistance.

“This recession has been brutal for small business,’’ Arora says. “It’s a much-worse recession than the last one for small business.”

Top PPP Lenders for 2021 PPP

Rank Lender Name Loans Approved Net Dollars Average Loan Size
1 JP Morgan Chase 81,430 $6,048,741,297 $74,281
2 Bank of America 87,696 $5,339,101,618 $60,882
3 Itria Ventures LLC 165,827 $4,756,975,303 $28,686
4 PNC Bank 28,633 $2,877,088,585 $100,482
5 Cross River Bank 106,086 $2,511,524,537 $23,674
6 M&T Bank 15,507 $2,044,126,456 $131,820
7 Zions Bank 16,593 $1,982,086,510 $119,453
8 U.S. Bank 35,663 $1,914,171,309 $53,674
9 Wells Fargo Bank 44,861 $1,892,379,160 $42,183
10 TD Bank 21,833 $1,863,067,115 $85,333
11 Northeast Bank 17,255 $1,855,213,143 $107,517
12 KeyBank 14,791 $1,708,999,583 $115,543
13 Citizens Bank 26,544 $1,531,712,319 $57,705
14 Customers Bank 54,576 $1,405,437,610 $25,752
15 Fifth Third Bank 14,390 $1,333,769,118 $92,687

Approvals through 2/28/2021. Source: SBA