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Lou Rabon, the chief executive officer of Cyber Defense Group, is even suing JPMorgan Chase for allegedly unfairly favoring bigger businesses even though the federal program was intended to help small businesses. “It was supposed to be first come, first serve,” Rabon told CBS News. However, the lawsuit alleges that data from the U.S. Small Business Administration showed that “Chase prioritized and front-loaded applications with higher loan amounts.”
Simply applying for the federal funding through a lesser-known bank wasn’t a sure way to access the funding either, experts said. Research CBS obtained from the Brookings Institution shows that the Paycheck Protection Program, which the U.S. Small Business Administration backed, tended to support larger, white-owned small businesses and the way the program is structured is partly to blame. “In order to achieve scale and rapidity, they did it through lenders, and lenders rationally said, ‘We’ll start with our existing customers first because we have all of their info,’ and those tended to be larger small businesses,” Brookings fellow Joseph Parilla told CBS News.
The Center for Responsible Lending reported that about 95% of Black-owned businesses, 91% of Latino-owned businesses, 91% of Native Hawaiian or Pacific Islander-owned businesses, and 75% of Asian-owned businesses “stand close to no chance” of getting a Paycheck Protection loan “through a mainstream bank or credit union.”
RELATED: Black business owner on COVID-19 small business loan program: We’re ‘just screwed’
Natasha Crosby, a Black Virginia realtor, told CBS News her midsize bank only made its Paycheck Protection application available on April 16, and that day funding for the program was depleted. Other banks stipulated that she needed to have an ongoing lending relationship with them, a common ask of traditional banks. “I wasn’t even able to apply and be in a position to be denied,” Crosby told CBS MoneyWatch. “I was essentially denied from the onset because I had been banking with the wrong bank.”
April Richardson, a Black bakery owner in Maryland, said she was hardly surprised that National Bank rejected her application for a $23,000 loan. “I never thought I’d get anything because I am a minority and a woman and own a micro-small business,” she told CBS News. She was, however, hoping to once again employ the seven workers she previously had to let go because she recently got an order for 11,000 cakes. “We were disenfranchised yet again,” Richardson said. “But we will figure out a way to do something even if it’s not an 11,000 cake order.”
Trump signed a relief package Friday to fund the depleted Paycheck Protection Program with $310 billion more, earmarking $120 billion for the smallest companies, according to ABC News. After the new funding passed, House Minority Leader Kevin McCarthy tried to shame Democratic lawmakers for earlier rejecting a $250 billion funding effort for the program before it ran out of money.
But Democratic legislators fired back that much of the blame lies with McCarthy’s own party, which is just now getting around to prioritizing the smallest businesses, which Democrats fought for. Rep. Alexandria Ocasio-Cortez of New York said “it is a joke when Republicans say they have urgency around this bill.”
“The only folks that they have urgency around are folks like Ruth’s Chris Steakhouse and Shake Shack. Those are the people getting assistance in this bill,” she said. “You are not trying to fix this bill for mom and pops. And we have to fight to fund hospitals? Fighting to fund testing? That is what we’re fighting for in this bill. It is unconscionable. If you had urgency, you would legislate like rent was due on May 1.”
