As Congress pushes closer to extending a second round of relief payments to small businesses after its $350 billion Paycheck Protection Program ran out of funds in two weeks, banks are facing severe backlash over their handling of the program.
Driving the news: A class-action lawsuit on behalf of small business owners alleges JPMorgan, Bank of America, Wells Fargo and US Bank prioritized larger loan applications over small ones in order to collect larger processing fees.
- As a result of a heavily lobbied exemption, chain restaurants were able to land multimillion-dollar loans and gobble up large chunks of the funds, reportedly along with hoteliers and publicly traded companies.
- In response to the backlash, the founder of Shake Shack returned $10 million in PPP loans.
Yes, but: While much of the program's total amount went to companies who were able to show their operations needed $1 million or more in assistance, suggesting they were hardly small businesses, nearly three-quarters of the total loans given out were for under $150,000.
- Almost nine out of 10 PPP loans (87.5%) were for less than $350,000, reports from the Small Business Administration show, a number that grew steadily in the final days of the program.
What's next: Banks are warning their customers that even if Congress provides an additional $300 billion by this week, they may not be able to provide loans to small businesses. They say the program needs closer to $1 trillion to meet demand, according to Politico.
- A survey from the National Federation of Independent Business found that only about 20% of small businesses that applied for a PPP loan had money deposited in their account as of April 17.