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The Small Business Administration was founded under President Eisenhower in 1953 to protect the interests of small business, according the organization’s website. The SBA started distributing loans to small businesses in 1954 and its responsibilities have expanded to poverty relief as well. In 1964, the Equal Opportunity Loan Program focused on expanding access to loans for individuals below the poverty line to encourage the formation of new businesses by those who typically cannot access credit. It’s experience in distributing loans to small business and those disadvantaged by crisis led to its role in distributing the $349 billion worth in loans allotted to the Payment Protection Program.

However, the task proved too daunting for the SBA, with the volume of applicants far exceeding its capacity to distribute loans. Funds for the Payment Protection Program’s first round of loan distribution ran out on April 16th, and 200 of those recipients were publicly traded companies aggregately receiving more than $750 million in government-backed loans, according to Fortune. The fact that such a large number of public companies received loans shows the lack of oversight regarding who is eligible and what type of business should receive government relief.

The SBA distributed a record number of loans in a record amount of time, leading to the neediest companies not receiving aid. Typically, the agency administers $21 billion in loans per year, according to ClassAction.org. However, the volume of funds allotted for the Payment Protection Program and the high demand led to the SBA administering over 14 years’ worth of loans within 2 weeks, according to Fortune.

The first round of distribution was haphazard, and banks received little guidance on how to appropriately distribute loans. The law did not prevent distribution of funds to companies that did not experience major decrease in revenue due to the coronavirus and some companies exploited that loophole, according to NPR. For example, Chembio Diagnostics, a company that develops infectious disease tests and has had their share value more than double during the pandemic, applied and received loans from the Payment Protection Program that will be used to help expand its operations.

"Congress must clarify that PPP loans will only be available to businesses that show a substantial reduction in revenue due to the coronavirus," Senator Rick Scott said.

Additionally, banks prioritized already existing customers when accepting applications.In response, some small businesses are suing major lenders, such as JPMorgan Chase and Bank of America.

The lawsuit against major U.S. lenders highlighted that lenders were receiving commissions for distributing loans and were thus incentivized to approve larger loans. Lenders were receiving 5% commission on loans up to $350,000, 3% commission on loans less than $350,000 and over $2,000,000 and 1% commission on loans under $2,000,000, according to the lawsuit. Larger companies are said to have been given privileged access because the average loan amount was greater in the first ten days of loan distribution.