Senators Ask SBA Inspector General to Investigate Reports that PPP Lenders Prioritized Larger Clients Over Small Businesses in Urgent Need
United States Senators Sherrod Brown (D-Ohio), Chuck Schumer (D-N.Y.), and Ben Cardin (D-Md.) recently sent a letter to Small Business Administration (SBA) Inspector General Mike Ware, requesting that he investigate reports that some lenders in the Paycheck Protection Program (PPP) have prioritized larger and wealthier clients over struggling small businesses applying for loans.
The decision to prioritize larger firms negatively impacts small businesses, especially those that are rural, minority-owned, and women-owned, who are adversely affected by the coronavirus pandemic, the senators said. They also asserted that the bias goes against the SBA’s ‘first-come, first-served’ principle.
“The lack of a prior relationship with a larger bank should not stand in the way of lending to small businesses that are truly small, unbanked, underserved, minority or woman-owned,” the senators wrote. “During this national emergency, all banks should open their doors to all small businesses in this time of need.”
The senators also highlighted the fact that banks are compensated for processing loans under the PPP and are entitled to fees. Under the legislation, banks benefit from a 100 percent loan guarantee, and can use the loans as collateral in order to obtain low cost term funding from the Federal Reserve.
“It is therefore essential that the most hard-hit businesses and underserved small businesses—including rural small businesses, minority-owned small businesses, and women-owned businesses—receive assistance as quickly as possible from any eligible lender,” they wrote.
Since $60 billion was allocated for smaller entities, the senators requested that the Inspector General review the PPP’s implementation and make any recommendations “to ensure small businesses get the money they need and are treated fairly by any lender participating in the Paycheck Protection Program.”