While the Payment Protection Program (PPP) was aimed in part at mom-and-pop businesses – and is run through the Small Business Administration (SBA) – it has come under fire for making loans to larger corporations.
According to a Bloomberg News report, JPMorgan’s loan processing favored the bank’s larger, commercial banking customers. Most of those customers that applied got loans, while the smaller companies that applied through the bank’s small business unit came up short. More than 300,000 JPMorgan customers applied to that business unit, but only 6 percent got loans under the federal program.
The PPP is part of the $2 trillion CARES Act that Congress adopted in late March. The U.S. Senate has approved additional funding under the program.
Some of the larger companies applying for loans through the commercial banking unit included restaurant chains, such as Shake Shack Inc., Ruth’s Chris Steak House and the sandwich chain Potbelly Corp. As news of the deals was released, Shake Shack said it would not accept the $10 million loan, as reported by PYMNTS.
Shake Shack Founder Danny Meyer and CEO Randy Garutti said in a letter on LinkedIn on Monday (April 20): “We now know that the first phase of the PPP was underfunded, and many who need it the most haven’t gotten any assistance. We’ve decided to immediately return the entire $10 million PPP loan we received last week to the SBA so that those restaurants who need it most can get it now.”
JPMorgan and several other lenders are now facing a lawsuit accusing the institutions of forking over loans to larger companies in order to earn the higher fees they could charge on bigger amounts.
Overall, JPMorgan said it had provided 26,500 loans to small businesses through both its commercial and small business units. According to a Bloomberg source, the bank’s commercial unit, with fewer clients, was able to process applications faster. Also, larger companies with bigger staffs were able to meet the requirements of the program more quickly.