Exhibit M - Article — Beringer Commerce, Inc. v. FIN Cap, Inc. (Dkt. 36-14, E.D.N.C. No. 5:21-cv-00251)

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EXHIBIT M

How Two Start-Ups Reaped
Billions in Fees on Small Business
Relief Loans
Blueacorn and Womply processed one-third of all
Paycheck Protection Program loans this year,
stepping in when big lenders wouldn’t.
June 27, 2021
Dan Bourque, an Uber driver in San Francisco, saw Womply’s ads and applied for a loan in mid-April.
Seventeen days later, he had a $10,477 deposit in his bank account.Jim Wilson/The New York Times
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.
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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.
“Millions of businesses were being left out,” said Barry Calhoun, the

chief executive of Blueacorn, which was founded last year solely to
help companies obtain P.P.P. loans. “Tiny businesses, self-employed
individuals and minority communities are left out in the cold, over and
over and over. Addressing that is a core mission for us.”
When the government started the Paycheck Protection Program in April
2020, it quickly found that banks, from national giants to regional
players, gravitated to bigger loans to more established businesses
because they were easier to make and more lucrative. The program’s
largest lender, JPMorgan Chase, refused to even make loans of less
than $1,000.
To encourage banks to lend to smaller businesses, Congress in
December raised the fees for small loans. And in February, the
government tweaked the program’s rules so that unprofitable solo
businesses, which had previously been ineligible, could get loans.
Suddenly, there was a lot of money to be made — if only someone
could get businesses in the door.
“Literally free money for those who qualify,” a Blueacorn advertisement
on Facebook read. Womply banners adorned billboards and New York
City buses. “Get up to $50,000 in PPP,” read one. “Apply now!”
Those appeals were wildly successful. From late February to May 31,
when the program ended, the companies processed 2.3 million loans.
Most were for less than $17,000, and the vast majority went to solo
ventures, which are more likely to be run by women and people of color.
All that hustle had downsides, including widespread customer service
failures. And some lenders now have regrets about signing rushed
deals that delivered most of the profit to their partners.

A Light-Bulb Moment
In December, Congress said that banks making Paycheck Protection
Program loans below $50,000 would be paid 50 percent of the loan’s
value, up to a maximum of $2,500. (Earlier, the maximum a lender could
earn was 5 percent of a loan’s value.) So a $5,000 loan that previously
made the lender $250 was now worth 10 times more. By making small-
dollar loans more profitable for lenders, Congress was hoping to help
the neediest.
More small P.P.P. loans were made in 2021 than
in 2020 — and even more fees were earned on
them.
An increase in the fees that banks received for issuing the smaller loans
made them more lucrative.
Number of P.P.P. loans made
Over $50,000;
up to $350,000
Over $350,000;
under $2 million
$2 million
or larger
Fees earned on P.P.P. loans

Over $50,000;
up to $350,000
Over $350,000;
under $2 million
So far in 2021,
the government
has paid $13.6
billion in fees on
loans of $50,000
or less.
$2 million
or larger
But reaching out to borrowers and collecting their paperwork were still
challenging — or, for Blueacorn and Womply, a light-bulb moment.
Blueacorn, based in Scottsdale, Ariz., was founded in April 2020 to help
small businesses find P.P.P. lenders. After Congress made the fee
change, the group of entrepreneurial coders who founded the start-up
decided to build a system to simplify the paperwork, betting that it
would encourage more lenders to make loans to the smallest
businesses.

In San Francisco, Toby Scammell, the chief executive of Womply, had a
similar idea. Founded in 2011 by Mr. Scammell and backed by venture
capitalists, Womply provides restaurants, retailers and other small
enterprises with tools to manage their customer lists, marketing
campaigns and payments. Mr. Scammell had earlier discovered that
banks didn’t want to bother with P.P.P. loans for many of Womply’s
clients.
“We tried to convince lenders to serve the smallest businesses and
they said no,” Mr. Scammell said in an interview last month. “I just
couldn’t get them to do it. I finally got fed up and said, ‘Here, we can
hand it to you on a silver platter.’”
An advertisement for Womply on a New York City bus.Stacy Cowley/The New York Times

So in late February, Womply started a web-based interface called Fast
Lane through which borrowers could apply for P.P.P. loans of up to
$50,000. Womply gathered their information, handled borrowers’
questions, ran fraud and identity checks and bundled the loan
documents into a package that it steered to one of its partner lenders.
All the lender would have to do, Womply said, was submit the
paperwork to the government and fund the loan.
A Big Impact
When Blueacorn and Womply started their systems in late February,
the volume of P.P.P. lending shot up. Largely because of the two
companies’ efforts, lenders made 5.8 million loans of $50,000 or less
this year, up from 3.6 million in 2020. The program’s average loan size
dropped from just over $100,000 last year to $41,560 this year. And the
six most active lenders this year each partnered with Blueacorn or
Womply, or both.
Blueacorn worked with just two lenders: Prestamos CDFI, a nonprofit
lender, and a small mortgage lender called Capital Plus Financial. Last
year, Prestamos made 935 P.P.P. loans totaling $27 million. This year,
working with Blueacorn, it made 494,415 loans — more than any other
lender — for a total of $7.7 billion.
David Adame, the president and chief executive of Chicanos Por La Causa, in Phoenix.Cassidy Araiza for
The New York Times
“What we did together is absolutely incredible,” said David Adame, the
chief executive of Chicanos Por La Causa, the parent organization of
Prestamos. “The myth that you can’t serve communities of color, or
underserved communities, with a technology model, at scale — we’ve
blown that away.”

Womply’s impact was even broader. It teamed with 17 lenders and
processed 1.4 million loans, totaling more than $20 billion — about 7
percent of the total P.P.P. money given out this year. “It was an amazing
team effort,” said Adam Seery, the managing director of Harvest Small
Business Finance, Womply’s largest lender.
Also in late February, Blueacorn and Womply got an unexpected
tailwind from a major rule change by the Small Business Administration,
which oversaw the loan program. Concerned that women and minority-
led businesses were being disproportionately left out, the Biden
administration overhauled the loan formula to award sole proprietors —
a group that includes contractors and gig workers — loans based on
their reported revenue rather than profit. Overnight, millions more
qualified for help. Drawn in by the marketing campaigns, they
stampeded toward the two companies.
By early March, “we were overrun with demand,” said Blueacorn’s Mr.
Calhoun, a private equity veteran who joined the company that month
to help manage its growth. “We had a 24-hour period where we went
from 15,000 new customer service tickets to 27,000,” he recalled.
“Those are Amazon-like levels.”
Blueacorn rented call centers and trained hundreds of temporary
workers to troubleshoot. Womply redeployed nearly all of its 200
employees to work on loan issues. Both companies still struggled to
keep up. On Reddit groups and social media sites, thousands of
borrowers complained about delays, poor communication and
problems resolving errors.
Louis Glatthorn, an Uber driver in Boone, N.C., who goes by Bob,
applied on Womply’s website on April 7 and signed the paperwork two

weeks later for a $7,818 loan. But the money — which is listed in
government records as approved — has not been paid by Benworth
Capital, one of Womply’s partners. Mr. Glatthorn’s attempts to reach
Womply for help have been unsuccessful.
“You can never talk to a person or actually make contact,” he said. A
Womply representative declined to comment on Mr. Glatthorn’s
experience.
Others had a smoother run. Dan Bourque, an Uber driver in San
Francisco, saw Womply’s ads and applied for a loan in mid-April.
Seventeen days later, he had a $10,477 deposit — funded by
Fountainhead SBF, another of Womply’s partner lenders — in his bank
account. For that loan, the process “was flawless,” he said.
The Money Pours In
The millions of tiny loans the two tech companies enabled, coupled
with Congress’s decision to make small loans more lucrative, led to
gigantic payouts for small lenders. Last year, Prestamos made $1.3
million for its lending. This year, it will collect nearly $1.2 billion,
according to a New York Times calculation of lenders’ fees based on
government data.
José Martinez, the president of Prestamos, in Phoenix. He said that Blueacorn will get a “significant”
portion of the $1.2 billion that Prestamos is collecting from the government.Cassidy Araiza for The New
York Times
But because of the deals they struck with Blueacorn and Womply, the
lenders will keep only a fraction of their earnings. Blueacorn will get a
“significant” portion of the $1.2 billion that Prestamos is collecting, said
José Martinez, the lender’s president. He declined to disclose the

deal’s terms, but said they were “fair and aligned” with each partner’s
contribution.
Prestamos made over a billion dollars in P.P.P.
loan fees in 2021.
A significant portion of those fees will be paid to Blueacorn, the
company it partnered with.
2020
2021
Number of P.P.P. loans
935
494,415
Total amount loaned
$27 million
$7.7 billion
Total fees earned
$1.3 million
$1.2 billion
Fees per $100 loaned
$4.71
$15.30
Blueacorn declined to comment on its fees. But an earnings report this
month from Capital Plus Financial, the other lender that partnered with
Blueacorn, provides some clues. This year, Capital Plus made 473,241
Paycheck Protection Program loans totaling $7.7 billion, for which it will
collect $1.1 billion in fees. In the earnings report for the quarter that
ended April 30, the publicly traded parent company of Capital Plus said
that the lender earned $464 million in fees during the quarter for its
loans. Of that amount, it kept just $150 million.
Through its two partners, Blueacorn will take in at least $1 billion this
year on the loans it processed, according to a Times calculation and
two people familiar with the matter.
Capital Plus Financial began making P.P.P. loans
only this year.

It partnered with Blueacorn (and Womply) to make the loans.
2020
2021
Number of P.P.P. loans
0
473,241
Total amount loaned
$0
$7.7 billion
Total fees earned
$0
$1.1 billion
Fees per $100 loaned
n/a
$14.66
Womply is poised for an even bigger haul. Seven lenders that partnered
with Womply on Fast Lane agreed to pay the company at least half —
and often much more — of what they collected on each loan, according
to five people with knowledge of the financial arrangements. The
company is likely to take in fees of $1.7 billion to $3 billion, according to
a Times analysis.
Toby Scammell, the founder and chief executive of Womply.Womply
But Womply is locked in fee disputes with some of its partners. At least
three lenders signed deals that they believed would operate on a
sliding scale, where they would owe Womply the top rate — 80 percent
of the lender fee — only on loans above a certain volume threshold. But
when it came time to collect, Womply told two of them that it believed it
was owed its top rate on every loan it had processed.
Womply's fees for the small loans added up.
For several lenders, the fees they owed to Womply increased — from
50 percent of what they collected to 80 percent — as Womply sent
more loans their way. That, coupled with a flat $250 per-loan charge,
left lenders owing Womply their entire fee on some loans.

$10,000 loan
$3,000
loan
$1,000
loan
Fee paid to lender
$2,500
$1,500
$500
Lowest amount paid to
Womply
$1,500
$1,000
$500
Highest amount
$2,250
$1,450
$500
Lender kept
$250 -
$1,000
$50 - $500
$0
Womply declined to comment on its fees. In a statement, the company
said it was “incredibly proud” of its work delivering P.P.P. funding to one
million businesses through its partners.
Two lenders said they would never work with Womply again. “At those
rates, I’m in the hole and losing money on many of these loans,” said
one lender, who asked for anonymity because Womply’s loan contract
prohibits lenders from disclosing its terms. “It’s disturbing and
disgusting.”

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