Big companies got fed loans first

Complaints center around lending program for small businesses.

—Ever since the U.S. government launched its emergency lending program for small businesses on April 3, there have been complaints that bigger companies had their loans approved and disbursed more quickly.

There is now evidence to back up those complaints.

An Associated Press analysis of Small Business Administration’s $659 billion Paycheck Protection

Program shows that nearly a third of the loans approved in the program’s first week ranged from $150,000 to $10 million, the maximum allowed. In a second round of funding that began April 27, such loans made up just 7.4% of the total.

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

The PPP made very low-interest loans available to any business — or any franchisee of a business — with under 500 employees. The loans would be forgiven if most of the money was used to keep employees on payroll.

Larger companies with connections to major national or regional banks got priority treatment in the program’s initial phase, the data show, while many smaller businesses said they were turned away because the banks required them to have a checking account, a credit card and a previous loan to be considered.

Some small businesses submitted an application but then heard nothing. Small restaurants, retailers and other companies most in need were left waiting and unable to pay their employees, landlords or vendors. Many learned not from their bank but via news reports that the initial $349 billion in funding had run out in less than two weeks.

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

It’s not clear how many small companies 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 2% of small businesses surveyed had shut down permanently in March, just after the pandemic hit the U.S.

The PPP, which still has more than $130 billion available, is a key part of the government’s coronavirus relief plan. The data released by the SBA July 6 does show that by June 30, 85% of the PPP loans had been for less than $150,000.