Hundreds of forgivable loans from last year's Paycheck Protection Program went to fake farms, ProPublica finds

The Paycheck Protection Program is meant to help small businesses and employees hurt by the pandemic, but the program has been criticized for emphasizing loans to large businesses at the expense of smaller and rural businesses. Now ProPublica has found that nearly 400 PPP loans worth $7 million were given last summer to fake companies, mostly farms.

"All of these loans to nonexistent businesses came through Kabbage, an online lending platform that processed nearly 300,000 PPP loans before the first round of funds ran out in August 2020, second only to Bank of America," Lydia DePillis and Derek Willis report. "ProPublica found 378 small loans totaling $7 million to fake business entities, all of which were structured as single-person operations and received close to the largest loan for which such micro-businesses were eligible. The overwhelming majority of them are categorized as farms, even in the unlikeliest of locales, from potato fields in Palm Beach to orange groves in Minnesota."

The Kabbage loans are only part of "a sprawling fraud problem that has suffused the Paycheck Protection Program from its creation in March 2020 as an attempt to keep small businesses on life support while they were forced to shut down. With speed as its strongest imperative, the effort run by the federal Small Business Administration initially lacked even the most basic safeguards to prevent opportunists from submitting fabricated documentation, government watchdogs have said," DePillis and Willis report. "While that may have allowed millions of businesses to keep their doors open, it has also required a massive cleanup operation on the backend. The SBA’s inspector general estimated in January that the agency approved loans for 55,000 potentially ineligible businesses, and that 43,000 obtained more money than their reported payrolls would justify. The Department of Justice, relying on special agents from across the government to investigate, has brought charges against hundreds of individuals accused of gaming pandemic response programs."