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  • Gary Mauney

Did your bank illegally send your small business's PPP loan application to the back of the line?

Mauney PLLC investigates potential violations of the Payroll Protection Program by banks that may have unlawfully discriminated against truly "small" businesses. Does your small business have a PPP lawsuit?

Charlotte attorney Gary Mauney and Mauney PLLC are investigating Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) lenders that may have violated the PPP’s “first-come, first-served” rule. In particular, Mauney PLLC is investigating whether North Carolina banks prioritized their PPP lending to favor their largest clients or depositors – rather offer PPP access to the small businesses that were the intended beneficiaries of the PPP program.

The PPP, part of the $2 trillion stimulus package created by the CARES Act, which was prompted by the the COVID-19 pandemic, was signed into law on March 27, 2020. The purpose of the PPP was to empower lenders to make available as much as $349 billion in government-guaranteed loans to cover eight weeks of a small business's payroll and other expenses.

Some small businesses now question whether PPP banks complied with the PPP law. Under the federal law that created the PPP, and the PPP rules codified at 13 CFR Part 120, the SBA informed potential small business borrowers that the PPP program would be be administered by participating banks on a “first-come, first-served” basis:

13 CFR Part 120, Section (m):  

Is the PPP “first-come, first-served?” 

Mauney PLLC has learned that at least one Charlotte bank favored its larger customers over smaller Charlotte business owners by moving the bank’s largest customers to the front of the line – in clear violation of the PPP’s “first-come, first served” rule. Why would a bank engage in such apparently unlawful conduct? Simple, by moving larger borrowers to the front of the PPP line, the bank would have maximized the origination fees on its PPP loans.

The structure of the federally-backed PPP loan program calls for financial institutions to be paid an origination fee based on a sliding scale based on loan size. The sliding scale ranged from 5% on smaller loans to 1% on the largest loans. The SBA's fee structure incentivized banks to front-load larger loans by offering up to $100,000 in fees for processing loans between $2 million and $10 million.

By contrast, smaller-dollar loans earned a far smaller origination fee per loan, up to just $17,500, for the processing of loans up to $350,000.

Had North Carolina banks informed applicants they were prioritizing larger loans over smaller loans, in favor of their largest customers, small Charlotte businesses could have taken their PPP applications to a community bank or credit union – where serving small businesses is a priority of their banking business model.

Two sets of data released by the Small Business Administration indicate that lenders that participated in the PPP program processed loan applications for $150,000 or less at twice the rate of larger loans only in the last three days of the program, compared to the first 11 days.

In other words, the SBA data indicates that some banks front-loaded applications for their largest PPP loans. Because, if applications had actually been processed on a first-come, first-served basis, as required by the PPP law, the average loan size across the entirety of the PPP program would have been consistent among all approved application types.

If you are a small business, in Charlotte, or elsewhere in North Carolina, that applied, and was otherwise qualified for, but did not receive, a PPP loan – you may have a cause of action against the bank that did not properly process your SBA loan. If you have reason to believe that your small business was unfairly or deceptively sent to the back of the PPP line, and you would like to discuss whether there is legal recourse for that denial, contact Mauney PLLC at There will be no charge for this consultation.


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