Denied Paycheck Protection Program (“PPP”) Financing? You may Have Legal Recourse.

Congress appropriated, and President Trump approved the deficit-spending of $350 million dollars of our taxpayer money to help small businesses. It is becoming clear that a great portion of these funds were unlawfully diverted away from Small Businesses to increase banks’ profits, and was at the expense of small businesses across the country. This apparent theft was against the law, and our firm is working to expose the wrongdoing and right this wrong. Please see below how you can investigate your company’s delay/denial of PPP funding.

The COVID-19 Pandemic has upended all aspects of society. Economically, though there have been few businesses that have thrived during this crisis, for most every other industry, there are very few that have not been catastrophically impacted. Indeed, many small businesses, if they have not done so already, will ultimately have to shutter their doors forever. Years of blood, sweat, and tears invested into their business ventures have been or will be lost in very short measure. For those of you in the small business community, you have utilities, payroll, taxes, and other obligations to honor. To pay these ongoing obligations, you need cash flow. Enter the federal government, to save the day with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, Pub. L. No. 116-136, 134 Stat. 281 (2020).

The CARES Act is a $2 trillion stimulus package which provides a number of notable economic stopgaps, including individual stimulus checks in addition to the Paycheck Protection Program (“PPP”). The CARES Act authorizes lenders to make available up to $349 billion to fund the PPP which provides federally-guaranteed loans up to a maximum amount of $10 million to eligible businesses that employee no more than 500 individuals which can be conditionally forgivable to encourage businesses to retain employees through the COVID-19 crisis so that businesses can maintain operational costs while revenues are drastically cut or entirely eliminated.

Though Congress has attempted to bridge the gap it what appears to be an actual good faith attempt at legislation to get us on the other side of the pandemic, even if the CARES Act was implemented with infallible procedural safeguards to ensure that the funds were utilized in accordance with the legislative intent, one thing is clear—the amount of funds available would not have been enough. For those of you that were able to submit an application for PPP assistance, the chances are, you did not receive any funds, particularly if you applied through a major national bank.

Unfortunately, there is a reason for this that goes beyond the obvious insufficiency of the funds allocated in the Act. National banks like Wells Fargo, Chase, Bank of America, as well as US Bank, have been accused of employing unlawful discriminatory criteria as they sifted through the hundreds of thousands of applications granting preferential treatment to businesses with who either had preexisting business relationships, (e.g., a line of credit, a business banking account, etc.) as well as to those applicants who applied for significantly higher amounts of money. What difference does the amount of the loan make? Well, the answer is nefariously simple: the lenders withstand to make a considerably higher servicing commission handling larger loans without having to expend the manpower necessary to service the many thousands of loans small businesses needed to survive this crisis. According to the Associated Press, 75 companies that received the PPP assistance of up to $300 million were publicly traded with market values of over $100 million. What makes matters worse, 25% of the companies warned investors PRIOR to the COVID-19 outbreak, that there was likely to be an economic downturn with each companies respective profitability.

To be clear, nothing in the CARES Act allows for the differentiation of a small business loan between the preexisting clients of a bank between those who have no relationship with the bank. The legislation also certainly does not allow for the banks to pick and choose which loan to push through on the basis that the bank withstands to make more commission on servicing the loan. To wit, the Act provides in pertinent part, that there are ONLY two requirements for a PPP loan to be approved:

The Applicant has certified to the Lender that (1) it was in operation on February 15, 2020 and had employees for whom the Applicant paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC, (2) current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant, (3) the funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments and utility payments, and (4) the Applicant has not received another Paycheck Protection Program loan; and,

The Applicant has certified to the Lender that it (1) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more than the greater of 500 employees or, if applicable, meets the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for the Applicant’s industry. SBA Form 2484.

In application, small business owners across the country, including locally in the Libertyville, Lake Forest, Mundelein, Vernon Hills and Lake County communities, justifiably relied on lenders to process their applications on a first come, first serve basis without employing discriminatory criteria Congress did not authorize, expecting that the funds would be made available to them. This justifiable reliance resulted in business owners continuing to pay employee salaries to secure the PPP funding in spite of the fact that revenue had been drastically reduced or eliminated entirely. Applicants also likely missed out on other opportunities to secure backup options as the small business owner simply fell further, and further behind on his or her obligations.

Our law firm is currently investigating potential claims on behalf of small businesses who may have been cheated out of the taxpayer money Congress and President Trump set aside to help small businesses employ their staff through the COVID-19 process. If your company has been denied PPP funding, or you have not been advised that your application for funding has been approved, you may contact our office. We are offering to take on new business clients for 30 days to investigate whether they may have claims, at no initial cost. At the end of 30 days, if the firm is able to provide further representation, a formal retention agreement will be presented to the client, or we will advise the client as to why we cannot represent them going forward and, if possible, refer the client to an attorney who is a better fit. Time to file a claim is limited, so do not delay.