Rapid Finance: Built SBA's COVID-EIDL Screening

Type: Small-business lender and lending-software company; second-tier subcontractor on SBA's COVID-EIDL loan-recommendation contract
Legal entity: Rapid Financial Services, LLC, which did business as RapidAdvance and now as Rapid Finance
Headquarters: Bethesda, Maryland

COVID-EIDL applications overwhelmed SBA's systems in spring 2020. SBA's prime contractor, RER Solutions, then "had to further subcontract with Rocket-affiliated technology firm Rapid Financial Services LLC (Rapid) to build a system capable of handling the surge," the House Select Subcommittee on the Coronavirus Crisis found, and "Rapid ultimately provided the large majority of the labor and key inputs." Of the $738 million SBA paid on the contract through February 2021, Rapid received $148 million, 20 percent, while supplying 163 of the people who worked on it, 86 percent of the contractors' staff. RER netted more than $340 million for the work of six employees.¹

Who owns it

Rockbridge Growth Equity, the Detroit private-equity firm co-founded by Dan Gilbert, bought Rapid Financial Services, then doing business as RapidAdvance, on September 16, 2013.² Rockbridge's case study describes the company as an "online financial services and technology company" and "the embedded finance partner of choice to companies that serve small businesses." It says a former chief technology officer of Rocket Mortgage helped rebuild Rapid's underwriting, origination and servicing modules.³ SBA's Inspector General described Rapid and Rocket Loans as "affiliates of Quicken Loans"; the Select Subcommittee called Rapid a Rocket affiliate "which is not a subsidiary."⁴¹ Before the pandemic, the staff report says, Rapid had served 35,000 small businesses with $2.2 billion in private financing.¹ Its chief executive is Will Tumulty.

What Rapid built for SBA

In 2018 SBA set aside its disaster-loan recommendation contract for a small business and awarded it to RER Solutions, with Rocket Loans as RER's large-firm partner. Rocket's system handled home and property-damage loans and could not take the volume or type of COVID-EIDL applications. So, in GAO's words, "Rocket Loans added a second-tier contractor—Rapid Finance—to use Rapid Finance's underwriting system to perform data validation and conduct automated checks for potential fraud and eligibility."⁵ SBA "relied on RER's second-tier subcontractor's system, the Rapid Finance Portal, to process COVID-19 EIDL applications," the Inspector General wrote; Rapid began processing loan recommendations under a subcontract with Rocket in late March 2020.⁴ Working with Rapid, SBA also put up a new application website with an option to apply for advances.⁵

The staff report describes the workflow. SBA sent application data to Rapid; Rapid's system ran it through third-party checks, including DecisionLogic bank verification, Experian and email, phone and bank-account verification services, and returned a recommendation to approve, manually review or decline. Applications with fraud alerts generally, "though not always," went to an SBA loan officer. Applications with no alerts went straight to an SBA team lead with a recommendation to approve. SBA staff approved loans and obligated funds inside Rapid's portal.¹

How it was paid

SBA did not compete the COVID work; in April 2020 it modified RER's existing contract and raised the ceiling from $100 million to $600 million, later $750 million, with approval from Administrator Jovita Carranza.¹ SBA agreed to pay more than $40 for each application reviewed, for automated services that, the staff report found, took "less than a second." Of the $738 million paid through February 2021, RER received $357 million, Rocket $233 million and Rapid $148 million. The third-party data services behind the automated checks cost $39 million, 5 percent of the total.¹

The Inspector General found that SBA could not see who was doing what. The team's cost proposal showed RER performing 65 percent of the work and Rapid 35 percent, but only for the first $6.8 million of the contract. For the rest, the proposal gave a fixed rate per recommendation "that did not differentiate between RER and Rapid's cost," and "SBA had no visibility, from a cost perspective, of how RER would perform the majority of the contracted services."⁴ The split and its consequences are laid out in The Six-Person Prime Contractor That Ran EIDL and The Fifty Percent Rule.

On February 11, 2021, Select Subcommittee Chairman James Clyburn wrote to Rapid Finance seeking documents on its EIDL work.⁶ The Subcommittee's findings, like the Inspector General's, are directed at SBA's contracting and review. They carry no penalty.

Rapid's records in court

The records Rapid's system kept for each application now turn up as trial exhibits. Prosecutors listed "Rapid Finance Application Details" for EIDL applications among their exhibits in the Southern District of Georgia trial of Bernard Okojie and, with a "Rapid Intake Form," in the Southern District of Florida case against Tracy and Carolyn Wade.⁷⁸

Will Tumulty — Rapid's chief executive.
RER Solutions — SBA's prime contractor on the EIDL recommendation contract.
Errin Green — RER's chief executive.
Dan Gilbert — co-founder of Rockbridge Growth Equity, Rapid's owner.

Rapid Finance

Who owns it

What Rapid built for SBA

How it was paid

Rapid's records in court

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Sources