This story was originally published by ProPublica.
More than a million government-approved loans ended up being cancelled, including some that would have gone to people who needed the loans and applied just as they were told.
In May 2021, Terry Kilcrease thought he saw a lifeline. He was out of work, living in a hotel in Lewisville, Texas, when he ran across a promising ad on Facebook. People who worked for themselves, it said, could still get loans from the government’s then-13-month-old pandemic Paycheck Protection Program (PPP).
Kilcrease had just started selling credit card processing systems to small businesses in early 2020 before the pandemic killed much of the need for cash registers. He hadn’t thought he was eligible for the $800 billion program. But the ad, posted by a company called Blueacorn, convinced him it was worth a try.
“We’ve created a 60-second quiz that can tell you if you qualify and how much you can get,” one ad promised
. So Kilcrease registered on the Blueacorn site and answered a few basic questions about his business.
“With a few clicks of a mouse, I had applied,” Kilcrease said. It was so quick, he doesn’t recall many details. Blueacorn checked for all required documents before passing along Kilcrease’s approved application to a lender, Prestamos.
Soon after, Kilcrease received loan documents from the Small Business Administration saying he'd been approved for a $4,790 forgivable loan, which he signed electronically and returned. The money would arrive in his bank account within ten business days, Blueacorn estimated.
Kilcrease was relieved.
“It was everything I needed to get going,” he said. “Just that little bitty bit.”
But the money never made it to Kilcrease. And it never appeared for hundreds of thousands of other applicants, either.
ProPublica has been tracking
PPP loans since the government first posted millions of them in July 2020. We kept updating our interactive database as the SBA disclosed more loan information. When the last round of the PPP closed, in May 2021, we noticed something strange: The number of loans the government said it had made kept shrinking with every new release.
By the time the SBA posted its latest update in late November, about 575,000 loans had disappeared, subtracted from an original total of 11.8 million. Most of them came through non-bank online lenders or banks that worked with web platforms such as Blueacorn, which solicited and processed huge volumes of applications for small-dollar loans in the final months of the program.
When we checked with the SBA, they told us the total number of cancelled loans actually topped 1 million. A sizeable number of those were likely applied for by people who were attempting to defraud the program and didn’t make it through additional screening — it’s unclear how many, since the lenders we talked to declined to specify.
But plenty of would-be borrowers were acting in good faith. Scores of them wrote in to our tip lines, perplexed that they had been listed as loan recipients, since they had applied but never received any money.
Their situations sounded a lot like Kilcrease’s: a quick approval in spring 2021, followed by some kind of snafu, and then a monthslong runaround from companies like Blueacorn, eventually resulting in no money after the lender the companies worked with withdrew its initial approval.
The phenomenon prompted the law firm Bailey Glasser to file a pair
late last year against Prestamos and another Blueacorn client called Capital Plus Financial on behalf of people who had similar experiences.
Prestamos has denied wrongdoing, and Capital Plus Financial declined to comment on pending litigation except to say that the plaintiff was ineligible for a loan.
This game of pingpong was maddening for prospective borrowers who had been told money was on the way, whether they were eligible for the program or not. It was also a hassle for lenders, who never got paid for hundreds of thousands of loans they sent to the SBA (though they reaped billions
for those that did get funded). And it likely could have been prevented if the SBA had required more screening on the front end, before approving loans in the first place. Continue Reading