Big companies first to get PPP loans, analysis shows Firms with bank ties able to get priority treatment in April

NEW YORK — Ever since the U.S. government launched its emergency lending program for small businesses in April, there have been complaints that bigger companies had their loans approved and disbursed more quickly. Evidence now exists 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 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 applied 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 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’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. It’s credited with supporting the job market when millions of workers have been laid off. The data released by the SBA July 6 does show that by the end of June, 85% of the PPP loans had been for less than $150,000.

Still, the AP analysis shows that early on some of the nation’s biggest banks were quickly approving loans for larger customers before ramping up their volume of smaller loans.

In the first week, 27% of the 4,231 loans JPMorgan Chase made were over $1 million. Chase, the nation’s largest bank and the biggest PPP lender through June 30, processed 243,427 loans in the second round of funding; only half a percent were $1 million or more.

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