AmEx's purchase of online lender Kabbage left desperate PPP borrowers in the cold

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AXPClose-up of logo for finance company Kabbage on paper on a light wooden surface, June 13, 2019.Smith Collection/Gado | Archive Photos | Getty Images

When the pandemic shut down Dawn Lindsay’s family carpet cleaning business last year, the U.S. government’s paycheck protection program provided a brief but essential lifeline. To get her $7,500 PPP loan, Lindsay turned to online lender Kabbage, a service recommended by her accountant.

Lindsay, who runs the company with her husband, Todd, said the process was smooth and easy. But the second round of PPP funding, which the Small Business Administration opened up in January amid the ongoing economic crisis, has been a nightmare. That’s because the Lindsays are now dealing with a very different Kabbage from the one they remember.

American Express acquired Kabbage in August. Not included in the deal was Kabbage’s loan book, which had become one of the biggest in the country for distributing PPP funds. The orphaned division, now known as K Servicing, has left borrowers frustrated, confused and searching for answers as their businesses hang on by a thread.

“This is the worst company and we may lose our loan that we desperately need for our business,” said Dawn Lindsay from her home in Lula, Georgia, about 70 miles northeast of Atlanta. The couple started Esteamed Solutions in 2018 with retirement money from Dawn’s years of waiting tables at a sushi restaurant and Todd’s career at Cargill. “We’re down to our last bit of savings,” she said.

The Lindsays’ struggles are familiar to thousands of Kabbage customers, who were relieved last year when the fintech company came to their aid with an easy-to-use online application that could walk them through a complicated process. Many banks and credit unions were struggling to meet the needs of recipients in the government’s $349 billion program for small businesses.

As part of its Disruptor 50 series last year, CNBC included Kabbage (ranked 24th on the 2020 list) and highlighted the company’s rapid move to partner with small banks and jump into PPP loans, helping get emergency assistance to restaurants, boutique hotels, beauty shops and corner retailers. At the