Biz2Credit Issues Statement on FTC Settlement

Biz2Credit, an award-winning, minority-owned fintech that since 2007 has arranged more than $8 billion in small business financing, today issued the following statement about its settlement with the U.S. Federal Trade Commission:

Consistent with its longstanding mission, Biz2Credit focused on funding traditionally underserved small businesses during the Paycheck Protection Program (PPP). During PPP2 (2021), the company processed over half a million applications and provided much-needed funding to more than 170,000 small business owners.

The FTC's investigation focused on whether the company's average processing time for PPP loans was longer than estimated on its website. In response, the company compiled statistical proof demonstrating that the average processing times referenced on its website accurately reflected the experience of bona fide customers, including those that requested their applications be withdrawn. The PPP program had strict eligibility requirements, and the company targeted its disclosures to bona fide customers who met those requirements. The FTC, however, claimed that Biz2Credit's average processing time estimates should not only have taken bona fide customers into account but should also have included customers whose applications Biz2Credit reviewed and rejected as potentially fraudulent or ineligible.

The company said, "Biz2Credit is proud of its record of helping small business owners, and of the steps it took to protect against PPP fraud and abuse of taxpayer funds. During PPP, we viewed it as our role to provide funding only to the eligible small business that applied to us, and the statements on our website about average processing time gave those legitimate applicants an accurate estimate of what they could expect."

It is well known that the PPP program was subject to massive amounts of applicant fraud. The Small Business Administration (SBA) has estimated that it disbursed over $200 billion in COVID-19-related relief, including PPP loans, to potentially fraudulent actors. The SBA and other government agencies called upon all PPP lenders to do their part in protecting against fraud, and Biz2Credit took this responsibility seriously.

Biz2Credit developed state-of-the-art systems and controls to detect fraud and ensure program eligibility, closely adhering to PPP program requirements. Given the high levels of fraud and ineligibility detected, the company funded only around 30% of all the applications it received in 2021. PPP lenders like Biz2Credit made money only when they funded applications. In short, Biz2Credit did the right thing during PPP and prioritized program compliance.

The company continued, "Had we not taken the extra steps and time needed to vet applications, even more of the limited PPP funding would have gone to fraudsters and companies not eligible for PPP loans instead of legitimate small businesses in need. Ineligible applications took longer to review and deny but our estimates accurately reflected the experience of legitimate loan applicants, the same small business customers the PPP program was designed to serve." Biz2Credit also demonstrated to the FTC that it accommodated customers who wished to have their applications withdrawn, and that it did so on a timely basis.

Commenting on its decision to settle with the FTC, the company stated, "We are disappointed that the FTC took the positions that it did. Legal compliance is central to our business and strong reputation, and during the PPP program we did as much as any lender to comply with the government's guidance. Not only that, we answered the call of the Biden Administration to fund truly underserved small businesses, as 47% of the businesses we funded during PPP were minority-owned businesses and 32% were women-owned businesses. The typical business we funded had under 3 employees."

The company concluded, "the unfortunate reality is that FTC actions like this are very costly to litigate. Our decision to settle rather than contest the FTC's claims in court represents a pragmatic decision to put the matter behind us with no admission of wrongdoing. In short, Biz2Credit agreed to this settlement so it can continue to fully concentrate on the important work of financing small underserved businesses in these uncertain times."