A firsthand account of the paycheck protection program, meant to help struggling small businesses hit by COVID-19, instead prioritizing those with the best relationships — not the neediest or most deserving
posted online that it got 75,000 applications from its own business banking customers in the first hour after its first cursory application went live on Friday April 3rd. On the following Monday, as it digested guidance from the SBA, it put up a new more detailed application form requiring more documents, including the IRS Form 941 submitted with payroll taxes. As it worked through problems we “looked to keep people in the same general order they had come to us” on April 3rd, the bank said.
A path towards greater equality might be as simple as appropriating more of the second round of loans to small community development financial institutions or CDFIs. These local banks are more likely to have ongoing relationships with small neighborhood businesses than mega-banks like JPMorgan Chase or Citi.
To be fair, some PPP recipients are both worthy — and well-connected. Before the coronavirus struck, the 120-person travel booking site Hotelplanner.com was on pace for $50 million in net revenues this year. “Business is down over 90%,” reports Chief Operating Officer Bruce Rosenberg. That makes the West Palm Beach, Fl.-based company specializing in group bookings , a seemingly-deserving PPP loan candidate.
There are other factors in play besides sheer favoritism. Cabbabe and others note that it was harder for banks to lend to non-customers because the government didn’t waive anti-money laundering “know your customer” rules for the PPP lending race.
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