The New York Times: How Two Start-Ups Reaped Billions in Fees on Small Business Relief Loans

Though Congress approved billions in aid for small companies to help them keep paying their employees during the pandemic, there was a big problem: It wasn’t reaching the tiniest and neediest businesses.

Then two small companies came out of nowhere and, through an astute mix of technology and advertising — and the dogged pursuit of an opportunity that big banks missed — found a way to help those businesses. They also helped themselves. For their work, the companies stand to collect more than $3 billion in fees, according to a New York Times analysis — far more than any of the 5,200 participating lenders.

One of the companies, Blueacorn, didn’t exist before the pandemic. The other, Womply, founded a decade ago, sold marketing software. But this year, they became the breakout stars of the Paycheck Protection Program, the government’s $800 billion relief effort for small businesses. Between them, the two companies processed a third of all P.P.P. loans made this year, the Times analysis found.

Blueacorn and Womply aren’t banks, so they couldn’t actually lend any money. Rather, they acted as middlemen, charging into a gap between what big banks wouldn’t do and what small banks couldn’t do. First, they unleashed marketing blitzes encouraging freelancers, gig workers, sole proprietors and other small merchants to apply for loans through their websites. Next, they directed those applications to lenders. In return, they took a hefty cut of the fees that lenders made on each loan.