The Paycheck Protection Program (PPP) was intended to help small businesses survive during the lockdowns triggered by the coronavirus pandemic. The $349 billion in loan funds were given to banks, who were then responsible for distributing the money to businesses. Unfortunately, these banks often wrongly favored customers who borrowed more money. Higher loan amounts translated to bigger fees reaped by the banks.
Struggling businesses were promised a lifeline in the midst of an unprecedented crisis. Loans should have been distributed on a first come, first served basis. But banks prioritized their bottom lines and raked in profits. Now, they are facing lawsuits over mismanaging the money and breaching the public’s trust. If your company was unfairly denied a loan, a Connecticut business litigation attorney can help.
The CARES Act became law during the coronavirus pandemic, as government lockdowns closed many businesses. Potentially forgivable loans were made available through the PPP for businesses who lost money because of the economic downturn. Small businesses, those with 500 or fewer employees, could apply for loans to cover payroll, rent, and utilities.
The funds allocated to the banks were quickly exhausted by extraordinary demand. One problem that emerged was that businesses who didn’t need the money were borrowing it. But it was also revealed that banks prioritized borrowers who asked for larger loan amounts. More money borrowed translated to heftier fees for the banks.
Data from the SBA suggests that banks front-loaded applications that were made for higher amounts. Meanwhile, loans under $150,000 were pushed to the back of the line.
By “front-loading” these higher dollar value loans, many small businesses were left with nothing when the money ran out. Four banks have been hit with lawsuits over the practice: Bank of America, Wells Fargo, JPMorgan Chase, and US Bank.
Larger companies like Shake Shack and Ruth’s Chris received loans while other small businesses did not. After negative publicity emerged, Shake Shack returned its $10 million loan to the government.
There is criticism that the PPP was severely underfunded from the beginning. Congress was not prepared for the rush of borrowing and simply didn’t allocate enough to the program. There was only so much money available, so businesses were bound to be shut out.
However, if a bank improperly prioritized a higher loan or delayed an application, that runs afoul of the program’s rules. Larger, preferred customers should not have benefited at the expense of those in need. If these banks had been honest about their policies, small businesses could have taken their applications to another financial institution.
If you believe your bank did not properly handle your loan, a Connecticut business litigator may be able to assist. You should start collecting as much information as possible concerning your loan request. That may include:
- A copy of your PPP loan application
- Supporting documentation for your loan, such as payroll records
- Records of any correspondence with your bank
- Notes about any conversations you had with anyone at your bank
- Names and contact information of anyone at your bank you spoke with
The banks are sure to fight any allegations of mishandling PPP loan funds. Many banks have refused to comment on the pending lawsuit, while others have denied the claims. It’s not easy to take on the big banks. You need an experienced and dedicated Connecticut business litigator on your side.
FIGHTING FOR THE RIGHTS OF CONNECTICUT SMALL BUSINESSES
The attorneys of Aeton Law Partners meet the legal needs of small businesses throughout Connecticut. If your business was skipped over for a PPP loan, you may have recourse. x