Saturday, April 18, 2020 || By Michael Romain || @maywoodnews || Featured Photo by Ashim D’Silva on Unsplash

A state lawmaker is urging people to boycott large banks like JP Morgan Chase and Bank of America for allegedly making the process of applying for federal COVID-19 emergency small business loans harder than it has to be, especially for minority business owners. 

“I’m encouraging folks to boycott big banks until they remove their restrictive policies that keep these funds from small businesses — especially small businesses of color,” said state Rep. Emanuel “Chris” Welch (7th).

Welch has created a change.org petition demanding big banks “treat black businesses equitably during COVID-19.” The petition has so far garnered 170 signatures of its goal of 200.

The federal government’s Paycheck Protection Program — the third phase of the CARES Act, which Congress passed in March to address the COVID-19 pandemic — was supposed to give $350 billion to banks across the country to lend out to small businesses suffering from the mass closures that have been enacted by states in order to slow the spread of COVID-19. As long as businesses use at least 75 percent of the funding on payroll, most of the loan is forgiven.

But much of the funding, which is now used up, went to large corporations like the Chicago-based restaurant chain Potbelly Corporation, which got a $10 million federal loan on April 10, according to a recent New York Post report.

“The so-called PPP loans were aimed at helping companies with up to 500 employees cover payroll and overhead costs,” The Post reported. “But lawmakers expanded eligibility for restaurants so that companies could apply as long as they had no more than 500 workers at any single location.”

In addition, lenders like JP Morgan Chase and Bank of America reserved the federal funds to customers who already have outstanding loans with the banks, therefore shutting out many small businesses without existing loans or even ones that had paid off loans.

“One business owner who has a children’s clothing store in South Florida got rejected by Bank of America and tweeted that it was ‘appalling,’” according to a Yahoo Finance report, which added that the woman “had taken loans out from Bank of America before, but because those loans were paid off, she also was not eligible.”

In a statement, Bank of America told Yahoo Finance that “its ‘near-term priority’ are its nearly 1 million small business borrowing clients: ‘As the administration has made clear, going to your current lending bank is the fastest route to completion.’”

In a statement, Welch cited a 2016 study by economists at the Stanford Institute for Economic Policy Research, “which found that first year black businesses are 7 times less likely to receive a bank loan that white businesses and twice less likely to use business credit cards.” 

Many customers of large banks also complained about the many technical glitches and bureaucratic layers they met while trying to apply for the federal loans.

“Their response to increased applications was not to scale up capacity, but rather, to turn away those most in need,” Welch said of the large banks.

“The restrictive lending policies of big banks are stopping small businesses from receiving PPP funding,” Welch said. “This was not designed to be a handout to banks that allows them to pick and choose recipients — it’s meant to provide immediate assistance to small businesses, so they can keep playing their employees.”

Welch highlighted the challenges that Stacey Armstrong, the owner of Sha-Poppin Gourmet Popcorn, 10352 Roosevelt Rd. in Westchester, experienced trying to secure a PPP loan through Chase Bank.

During an interview on April 18, Armstrong said that she encountered “several error messages” that appeared on her computer screen during the application process.

“That continued for days, several times a day,” she said. “Finally, I got a call from the midwest vice president of Chase and she was apologetic that my application didn’t go through. Her answer was that, if I wanted, I could change banks and she’d understand, which was really unacceptable to me. It lets me know that they really don’t care.”

Armstrong said that she eventually got PPP funding through a local credit union, where the application process was a lot easier.

“They were hands-on,” she said. “I communicated back and forth with them through email. They responded very quickly. It was a very easy process. It’s unfortunate that the larger banks don’t have the capability of doing the same thing that a credit union or small bank can do.”

Armstrong, who has had to adjust her hours, said that the federal funding is a step in the right direction.

“I employ a lot of young people in high school and in college, so I’m able to at least keep them here for a certain amount of time,” she said. “I can pay them, because they’ve been very dedicated to me.”

Sha-Poppin is open Thursday through Sunday, 11 a.m. to 5 p.m. Although no one can come into the store, she’s taking orders over the phone, which customers can place at the door and receive in their cars. The number is (877) 742-7671.

To access Welch’s petition, click here.