Kabbage discontinues lending operations amid the coronavirus pandemic - Business Insider

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ICYMI: Kabbage's decision to suspend credit could hurt customer satisfaction in the short term, but its decision is along the same lines as other lenders

Additionally, Kabbage reportedly cut off credit to some of its existing borrowers without giving them any notice, with a number only finding out about the suspension when they logged into their accounts, Bloomberg. At the time of writing, Kabbage had not disclosed when it would continue with its normal lending operations, though the suspension appears to be temporary. For context, Kabbage lent out $2.8 billion to SMBs throughout 2019.

Kabbage's decision to suspend credit could hurt customer satisfaction in the short term, but its decision is along the same lines as other lenders'. Customers whose credit lines were suspended without notice are likely to be dissatisfied with Kabbage services, though the company has taken other steps to support them through the current crisis. The wave of customer backlash suggests that Kabbage should have been more transparent and proactive in communicating the move to customers.

Many alt lenders have decreased their lending to SMBs, which become riskier borrowers during a market downturn. OnDeck and Fundbox, for example, have put holds and limits on customers' ability to draw on their lines of credit, per Bloomberg. Additionally, lending marketplace Become has data that the approval rate for business loans has dropped dramatically, from 15% in February to just 4% in March.

Moving forward, Kabbage wants to support the Small Business Administration 's Paycheck Protection Program — and focusing on a white-label solution might be an effective way to do this.

 

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