The geographic inequity of small business coronavirus aid

The second round of Payroll Protection Program loans for small businesses got under way Monday — and disparities between the haves and the have-nots are becoming more stark.

What's going on: Small businesses in the Midwest, notably Nebraska, got a big share of the loans. But states like New York and California — hit hard by the coronavirus economic shut down — came up comparably short.

Where it stands: Qualifying firms in states like New York and New Jersey are less likely to have longstanding relationships with community banks — a factor that seems to have made a big difference in who got a share of the initial $350 billion pot of federal money.

• Just 15% of companies based in "the most affected congressional districts" got funds from the PPP program, new findings from the National Bureau of Economic Research show, while "more than 30% of all businesses operating in the least affected congressional districts were able to tap into PPP funding."
• Now that $310 billion more is being doled out, there are fears that the same dynamic will be at work — including early glitches — leaving firms without relief.

Between the lines: Big states like Texas, New York and California received the largest overall dollar amounts from the program. But "examining the percentage of small businesses receiving loans in a state paints a very different picture," as TIME points out.

• In Nebraska, 10.7% of small businesses received loans, second only to North Dakota, per TIME's analysis.
• In New York, the figure was 1.9%, "third-to-last ahead of California and Nevada."

The number of PPP loans approved in Nebraska cover 81% of the state’s eligible payrolls, according to Bloomberg, which cites data from Evercore.

• The figure was around 70% in Montana, Minnesota and Wisconsin.
• Compare that to New York and California, where the number of approved small business loans cover just about 40% of each state’s eligible payrolls.

By the numbers: Community banks — which play an outsized role in more rural states — were thoroughly prepared and more familiar with the SBA's back-end systems, while the big banks were slower to open portals for businesses.

• Montana community bankers “were literally sitting up all night waiting for those [SBA] portals to open and were submitting loans within minutes,” Brent Donnelly, who heads up Montana’s SBA office, tells Axios.
• At one point, Montana-based Stockman Bank was leading the nation in terms of loans disbursed, CEO Bill Coffee tells Axios. So was Nebraska-based Union Bank & Trust, per the Washington Post.
• Local bankers have a “very vested interest in making sure those businesses in the town survive,” says Richard Baier, head of the Nebraska Bankers Association.

Of note: The biggest four banks typically account for 36% of all loans to small businesses — but they distributed less than 3% of all PPP loans, per the NBER paper.

The backstory: When bigger banks opened up their small business loan portals, they faced complaints from small business customers who said their applications were in limbo.

• Others couldn’t submit applications at all because the banks prioritized customers who had previously borrowed money from them.
• According to the New York Times, some of the nation's biggest banks prioritized bigger, wealthier clients — like the Potbelly sandwich shop chain, which has since announced it would return its PPP loan.

The intrigue: Some small businesses are ditching their banks over PPP loans — or looking elsewhere.

• Scott Roy, who runs a small consulting agency in Knoxville, Tenn., dropped his relationship with TIAA because it wasn’t participating in the program and moved his business to Mountain Commerce Bank. He submitted a PPP application through the smaller bank and was approved days later.
• "You know a decision you made years ago about who to bank with is now coming back to bite you in the butt," Roy tells Axios.
• Ricky Singh, a California-based small business owner, says his banking relationships with Wells Fargo and Chase didn't land him luck in getting a loan.
• Rather, he was approved for a PPP loan through Intuit's QuickBooks.

What to watch: Public outrage has prompted several powerful firms and public companies — as well as the Los Angeles Lakers — to return the money they got under the program, and the government set up guardrails for who should and shouldn't apply.

• But it's still unclear if money will flow more evenly to places that need it the most.

Note: Axios qualified for a loan under this program. More details here.