Large companies first received coronavirus loans, analysis finds

Large companies with links to large national or regional banks received priority treatment in the initial phase of the program, according to the data.

NEW YORK – Since the U.S. government launched its emergency small business loan program on April 3, there have been complaints that large businesses have seen their loans approved and disbursed faster.

There is now evidence to support these complaints.

An Associated Press analysis of the Small Business Administration’s $ 659 billion paycheck protection program shows that nearly a third of loans approved in the program’s first week ranged from $ 150,000 to $ 10. million dollars, the maximum allowed. In a second round of funding that began on April 27, those loans were only 7.4% of the total.

The average loan amount fell from $ 257,240 on April 10 to nearly $ 105,000 on July 17, according to the SBA.

The PPP has offered loans at very low interest rates to any business – or any franchisee of a business – with fewer than 500 employees. The loans would be canceled if most of the money was used to keep employees on the payroll.

Large companies with links to large national or regional banks received priority treatment in the initial phase of the program, the data showed, while many small companies said they were turned down because banks gave them priority. asked to have a checking account, a credit card and a previous loan. to take into consideration.

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Some small businesses submitted a request but then heard nothing. Small restaurants, retailers and other most needy businesses have been left on hold and unable to pay their employees, owners or vendors. Many learned not from their bank but from news reports that the original $ 349 billion funding ran out in less than two weeks.

“The program was structured to take advantage of existing banking relationships that have favored established businesses,” said John Arensmeyer, CEO of the Small Business Majority Advocacy Group. “It was not designed for very small businesses.

It is not known how many small businesses have failed because of the pandemic. A survey conducted for the National Bureau of Economic Research by researchers at Harvard University, the University of Chicago and the University of Illinois found that 2% of small businesses surveyed had closed permanently in March, just after the pandemic hit the United States. means that 100,000 small American businesses closed their doors even before the launch of the PPP.

Andrew Cao applied for a loan of $ 72,500 for his digital marketing company with 10 full-time and part-time employees the day after the opening of the first round.

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Cao submitted his request to Bank of America, where his company had been a client for 10 years. Cao received two phone calls telling him that he had to submit his documentation, which he had already done, but could not get any information about his loan.

“When we heard that the funds were depleted, I said, ‘Are you serious? “We tried to do everything we could – we submitted documents, contacted the bank, then nothing,” said Cao, part owner of Motoza, based in Austin, Texas.

Cao submitted a request through a small local bank two days before the end of the first round. Motoza got his loan a few days after the program reopened on April 27.

The PPP, which still has more than $ 130 billion, is a key part of the government’s coronavirus relief plan. He is credited with supporting the job market when millions of workers have been made redundant. Data released by the SBA on July 6 shows that as of June 30, 85% of P3 loans were below $ 150,000.

Yet PA analysis shows that initially some of the country’s largest banks were quick to approve loans for larger clients before increasing their volume of smaller loans. In the first week, 27% of the 4,231 loans made by JPMorgan Chase exceeded $ 1 million. Chase, the country’s largest bank and largest PPP lender until June 30, processed 243,427 loans in the second round of funding; only half a percent were $ 1 million or more.

Among other large banks, nearly 18% of the 1,185 loans TD Bank made in the first week were over $ 1 million, as did 13% of Truist’s 7,143 loans. PNC made only 675 loans in the first week, but 40% exceeded $ 1 million.

At Chase, each of the four divisions handled their clients’ loans separately, spokesperson Patricia Wexler said. This included its commercial banking division; among its clients are small and medium-sized enterprises.

“There was no prioritization of one profession over another. Each company processed applications generally sequentially in the order in which clients applied, ”said Wexler.

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Larger loans are usually prepared by a team of financial officers and accountants using sophisticated software, while small businesses may not have such sophisticated applications that take longer to review. Knowing well-established clients can speed up the application process. And from a banks perspective, it’s good business to take care of their biggest customers.

Although the evidence indicates that the big loans go to the leading banks, it is not known what happened after the requests entered the SBA system. The SBA did not respond to a request for comment.

In the beginning, only established SBA lenders could accept applications, limiting the ability of businesses to apply. The government eventually integrated online lenders, credit unions and more community banks. But “it might be too late for who knows how many small businesses,” said Karen Kerrigan, chair of the Small Business Advocacy Group and Entrepreneurship Council.

Jane Gideon applied for a loan for her advertising business the day the P3 started, but had to wait when the initial funds ran out.

“When it didn’t happen the first time, I knew what was going on. The rich and the connected had priority because they have relationships that put them at the front of the queue, ”says Gideon, owner of San Francisco-based Incendio International. She did not learn until April 29 that her loan had been approved.

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