While JPMorgan provided loans to virtually all of their commercial banking customers who applied for coronavirus relief through the small business program, their business banking unit - which serves smaller firms - only funded around 6% of applications for the Paycheck Protection Program (PPP), according to Bloomberg.
Of t he bank's more than 300,000 small business customers who applied, only around 18,000 were funded according to the report. Meanwhile, around 5,500 of the bank's commercial banking customers - nearly all of them, received loans through the small business lending program.
In total, JPMorgan originated a total of $14 billion in loans through the program.
The data reveal that, in the race to get a loan in the first-come, first-served program, larger businesses had a leg up over smaller ones -- even when applying through the same bank.
Restaurant chains, including Shake Shack Inc., Ruth’s Hospitality Group Inc., which operates Ruth’s Chris Steak House, and sandwich chain Potbelly Corp., received loans through JPMorgan. On Monday, Shake Shack said it was returning the money. -Bloomberg
JPMorgan claims it ultimately provided 26,500 loans to small businesses through both business units, which they say over 60% went to companies with fewer than 25 employees.
The commercial bank, however, was able to process applications faster due to its lower number of clients, according to a personal familiar with the matter. Larger companies also had lawyers and accountants filling out their paperwork, which gave them an advantage over small companies - who were left trying to input the documents themselves.
"We prioritized getting these loans to as many small businesses as possible," said JPMorgan spokeswoman Anne Pace. "We helped our clients as they came to us and stand fully prepared to help tens of thousands more small businesses apply as soon as additional funds become available."
In an email to clients, a JPMorgan executive said the bank unit that serves smaller firms received applications from more than 75,000 clients in the program’s first hour on April 3, and that the number grew significantly the following days.
“We had more than 2,000 Chase employees work over that weekend to review these forms, contact as many people as possible, and help position them to complete their application,” said Jennifer Roberts, chief executive officer of the unit, Chase Business Banking. -Bloomberg
What - was the bank supposed to simply make less money by holding up loans to giant corporations (many of which are public) in order to serve smaller clients that the PPP stimulus money was meant for? At least 29 public companies have disclosed receiving loans from JPMorgan, totaling approximately $141 million, and averaging around $5 million each.
The $349 billion PPP offered forgivable loans of up to $10 million for companies with up to 500 employees. The funds quickly dried up after a flood of large businesses and hedge funds tapped the program ahead of those who need it most - struggling small businesses.
With lenders inundated with applications, the Small Business Administration's computer system temporarily froze - running out of money in just 13 days. Lawmakers and the White House are now negotiating for another $320 billion to replenish the program.
JPMorgan is one of four lenders named in a recent lawsuit by small business owners, who claim that the bank prioritized loans to large companies in order to quickly earn higher fees.