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Many small businesses that were first in line for the Paycheck Protection Program (PPP) did not get the money they wished for. It has been alleged that’s because many big banks pushed them aside for businesses and large corporations with deeper pockets.
Countless small businesses are facing financial turbulence. And while Congress tries to fund operations, many are not reaping the benefits they hoped for or were promised. Unfortunately, provisions in the CARES Act intended to provide financial support to small businesses are benefitting big corporations more than local businesses, the lifeblood of America’s economy. According to a recent report, small and mid-sized businesses make up 44% of America’s GDP and nearly half of private-sector employment.
The PPP intended to provide low-interest rate loans to small and mid-sized businesses. And if companies use it to keep employees on the payroll, it can turn into a grant. However, the initial $350 billion allotted towards the program could not cover the demand. Ultimately, it dried up, leaving businesses who worked hard to qualify out of luck.
JP Morgan accused of violating program provisions
As many small businesses are struggling just to get by, corporate banks seem to be letting greed guide their decision making. In a recent lawsuit filed by Cyber Defense Group LLC and In The Mix Promotions Inc, both companies accuse JP Morgan Chase & Co. of favoring applicants seeking higher loan amounts. The suit alleges the bank did so rather than abiding by the PPP’s “first come first serve” rule. Under the program, participating banks, including JP Morgan, was supposedly entitled to receive origination fees of:
- 5% on loans up to $350,000
- 3% on loans between $350,000 and $2 million
- 1% on loans between $2 million and $10 million
The lawsuit alleges that the bank knew about the leverage it had and prioritized those who took out larger loans because it was better for the bank’s bottom line. Sadly, this left other small businesses who worked hard to file their applications on time in the dust.
To add insult to injury, JP Morgan allegedly did not tell small businesses that it would not prioritize them for taking out less money. In many cases, this limited small businesses’ ability to find another bank that would act in their favor.
You deserve to keep your business running
Small businesses are the backbone of the American economy. And when owners do everything they can to get the financial support they need, they deserve a seat at the table. If your small business loan got shoved aside by your bank when applying for a PPP loan, Spence Custer could help you get the fair treatment you deserve.