WASHINGTON — Senate Committee on Small Business and Entrepreneurship Ranking Member Ben Cardin (D-Md.), Senate Democratic Leader Chuck Schumer (D-N.Y.), and Senate Committee on Banking, Housing, and Urban Affairs Ranking Member Sherrod Brown (D-Ohio) yesterday sent a letter to U.S. Small Business Administration (SBA) Inspector General Mike Ware, calling for the immediate investigation of reports that some lenders participating in the SBA’s Paycheck Protection Program have prioritized the applications of their larger and wealthier clients to the detriment of smaller businesses adversely impacted by the coronavirus pandemic.

According to these reports, some private and commercial banking customers received special treatment from their banks when applying for assistance through the Paycheck Protection Program, while smaller businesses, including those at greater risk because of the pandemic, have struggled to receive timely assistance from their banks, contrary to the SBA’s “first-come, first-served” claims. The senators emphasize that the hardest-hit and underserved small businesses—including rural small businesses, minority-owned small businesses, and women-owned businesses—must receive assistance as quickly as possible from any eligible lender, and that the lack of a prior relationship with a bank should not stand in the way of lending to these eligible small businesses.

Senators Cardin, Schumer, and Brown, call on the SBA IG to review the implementation of the Paycheck Protection Program by SBA-eligible lenders, and to also provide recommendations on SBA’s current rules, regulations, policies, and procedures to ensure small businesses get the money they need and are treated fairly by any bank lender participating in the Paycheck Protection Program by May 8, 2020.

Senators Cardin, Schumer and Brown’s letter to SBA Inspector General Ware can be found here and below:

Dear Inspector General Ware:

We write to request that you investigate reports that certain lenders participating in the Small Business Administration’s (SBA) Paycheck Protection Program have prioritized the applications of their larger and wealthier clients to the detriment of smaller business adversely impacted by the coronavirus pandemic.

According to these reports, some private and commercial banking customers received special treatment from their banks when applying for Paycheck Protection Program, including “concierge”-type services that provide personalized assistance filling out paperwork and fulfilling other administrative requirements. At the same time, many retail customers, including smaller business that are at greater risk because of the pandemic, have struggled to receive timely assistance from their banks to help complete their applications and receive these much-needed funds.

Although the intent of the Paycheck Protection Program is to provide expeditious relief to struggling small businesses, in order to encourage their participation, banks are compensated for processing loans under the program and are entitled to fees, which are payable upon issuance of the loan. In addition, the banks benefit from a 100 percent loan guarantees and may use the loans as collateral to receive 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. 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. It is for that reason that Congress set aside $60 billion for smaller entities.  During this national emergency, all banks should open their doors to all small businesses in this time of need.

Accordingly, we ask that your office immediately review the implementation of the Paycheck Protection Program by SBA-eligible lenders and determine how the choices of these lenders impact the program’s policy goals of targeting aid to the small businesses that need it most. We also ask that you provide recommendation by May 8, 2020 on SBA’s current rules, regulations, policies, and procedures to ensure small businesses get the money they need and are treated fairly by any lender participating in the Paycheck Protection Program.

Sincerely,

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