Kabbage, an online lender focusing on SMEs, is apparently temporarily laying off employees in light of the COVID-19 pandemic. Additionally, a support center in Bangalore is said to be shuttering and executives are taking pay cuts as the Fintech struggles to adapt in a landscape where so many small businesses are being forced to temporarily close their doors.
According to a report in TechCrunch, a memo has been distributed indicating a large number of Kabbage’s 500 employees are being furloughed – effective immediately.
To quote Rob Frohwein, CEO and co-founder of Kabbage:
“We realize this is a shock to everyone. No business in the world could have prepared for what has transpired these past few weeks and everyone has been impacted. The economic fallout of this virus has rattled the small business community to which Kabbage is directly linked. It’s painful to say goodbye to our friends and colleagues in Bangalore and to furlough a number of U.S. team members. While the duration of the furlough remains uncertain, please bear in mind that the full intention of furloughing is temporary. We simply have no clear idea of how long quarantining or its reverberations in the economy will last.”
The move by Kabbage should come as no surprise as the majority of its business is financing smaller firms – the same companies that have taken the brunt of the impact of the Coronavirus. Kabbage is not alone in reviewing its Fintech operations. LendingClub (NYSE:LC) issued an 8-K not too long ago indicating it was reviewing its credit operations to better gird the platform as the economy sinks.
Meanwhile, the US Congress has passed into law a $2 trillion stimulus package designed to help support these same small businesses with forgivable loans. It is not yet quite clear as to the long term impact of such a stimulus but it will certainly have an impact on Kabbage and other online SME lenders.
Kabbage was quick to aid SMEs in announcing a fee-free platform where small businesses could sell services in advance. A website called HelpSmallBusinesses was quickly launched to help funnel money to listed firms.
Kabbage is one of the most successful online lenders in the US supporting SMEs. Depending on how long the COVID-19 pandemic endures the virus may have a profound impact on the Fintech.