What to Do if Your Business Was Unfairly Denied a PPP Loan


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In the wake of the coronavirus pandemic, Congress created the Paycheck Protection Program (PPP). The PPP was designed to help small businesses survive the shutdowns caused by coronavirus. Approximately $349 billion in loan funds were given to banks, who were then charged with distributing the money to businesses. Yet these banks sometimes favored customers who asked for more money. That’s because higher loan amounts mean bigger fees for the banks.

The problem is that small businesses that applied for the loans were not told about this preferential treatment. Had they known about it, they could have applied to another financial institution before the money ran out. Not only that, but this policy violated the rules of the PPP. The money should have been distributed on a first come, first served basis.

Banks that prioritized their bottom lines over the needs of small businesses raked in substantial profits. Now, several of them are being sued for mismanaging the funds and betraying the public’s trust. If your company was unfairly passed over for a PPP loan, our Westchester business litigation attorneys may be able to help.

First, some background on the PPP. As part of the CARES Act, the PPP extended potentially forgivable loans to small businesses hurt by coronavirus shutdowns. As everyone knows by now, these shutdowns caused extensive economic damage, with small businesses taking the brunt. Companies were allowed to apply for loans to cover payroll, rent, and utilities.

The funds allocated to banks under the PPP were quickly exhausted due to extraordinary demand. One cause of this was that a number of businesses who didn’t actually need the money applied for it. But banks also contributed to the problem by prioritizing borrowers that requested larger loan amounts. More money means heftier bank fees, creating an incentive to ignore the needs of smaller businesses.

Small Business Administration data suggests that bank’s front-loaded applications made for larger amounts. Meanwhile, loans under $150,000 were routinely pushed to the back of the line.

Front-loading these larger loans left smaller businesses with nothing when the money ran out. Four banks have already been sued over the practice: Bank of America, Wells Fargo, JPMorgan Chase, and US Bank. Others could be sued as well.

One larger company that received PPP loan money was Shake Shack. It applied for and received a $10 million loan, which meant a nice profit for the bank. After negative publicity, however, Shake Shack returned the loan to the government. Many other businesses did not.

Banks have tried to defend themselves by denying any preferential treatment for larger loans. They have also deflected criticism to the PPP itself. After all, the money ran out pretty quickly in part because of high demand. Indeed, Congress can rightly be criticized for not properly anticipating the huge demand for the loans.

But that would not excuse prioritizing a big dollar loan application while delaying or denying a smaller one. That violates the rules of the program and allows banks to unfairly profit off of the pandemic. Larger customers should not be favored just because they requested more money. The pending lawsuits will determine if the courts will hold the banks accountable for doing so.

If you were unfairly denied a PPP loan, talk to Rosenbaum & Taylor. We are actively investigating this issue and requesting that businesses whose applications were rejected come forward. You can start by collecting as much information as possible concerning your loan request. That could include:

  • A copy of your PPP loan application
  • Supporting documentation for your loan, e.g. payroll records
  • Copies of any correspondence with your bank
  • Notes about any discussions you had with anyone at your bank
  • Names and contact information of anyone at your bank that you spoke with


The banks have already promised to fight any allegations of mishandling PPP loan funds. Taking them on is no easy task. That’s why you need an experienced New York business litigator on your side. Rosenbaum & Taylor is here to help. If your PPP application was unfairly denied by a bank, or you have questions about your rights, call us today.

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The law firm of Rosenbaum & Taylor provides high quality legal advice and representation to insurance companies and their insureds, third-party administrators, businesses and individuals, protecting their interests in both litigation and transactional contexts and defending a wide range of claims and lawsuits.


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