Did the PPP Discriminate Against Women and Minorities?

5 min read • Apr 30, 2020 • Derek Miller

When Congress passed the CARES Act to protect individuals and businesses financially during the coronavirus pandemic, one of the most valuable provisions for small businesses was the Paycheck Protection Program (PPP). 

The PPP was designed to cover employee payroll for up to 8 weeks with a fully-forgivable loan.

While good in theory, it took less than 2 weeks to run out of the $349 billion set aside for the PPP. There were definitely small businesses that benefited from PPP loans, but much of the funding went to large corporations like Shake Shack and Ruth’s Chris, which received up to $10 million each.

As a result, thousands of small business owners across the country are left wondering how they’re going to stay afloat.

A few of these business owners are speaking up. They are bringing lawsuits against banks and other financial service providers, claiming discrimination, and fighting for the compensation they deserve. 

Was the PPP discriminatory? Or does the fault lie in the policies of financial providers? 

Lawsuits Claim Banks Prioritized High-Volume Applicants

The first claim against the PPP is actually against the banks that processed and administered SBA loans. 4 California-based businesses have filed lawsuits against JPMorgan Chase, Wells Fargo, Bank of America, and US Bank, claiming that they prioritized applications for large brands over small businesses. 

By processing applications with larger loan amounts, the banks stood to profit from the higher interest rates. Considering the PPP funds were dwindling within a week of opening, it would be in the best interest of banks to approve as many large applications as possible before the program closed.  

“The complaint says in the last 3 days before the money ran out, loan applications for $150,000 and less were processed at twice the rate of larger loans compared with the initial report, suggesting the largest loans were front-loaded,” the team at Bloomberg reports.

If true, it means the small businesses that needed the funds the most were likely blocked out in favor of larger corporations.   

Most Women and Minority-Owned Business Operate on a Small Scale

Along with the suit against the banks in California, other lawsuits against the PPP and its administrators have been filed across the country. One lawsuit filed in Annapolis, Maryland, claims the SBA and US Treasury Department discriminated against women and minority-owned businesses by making the application criteria too broad. 

A “small business,” according to the PPP, is any business with 500 employers or less—which includes individual franchise locations. With large companies flooding the system with applications, it was harder for women and minority-owned businesses to get noticed and approved.   

According to data provided in the lawsuit, 8 million firms are minority-owned in the United States, with 88.6% of them being nonemployer businesses (meaning they operate without paid employees, often as sole proprietors). Almost 10 million firms in the United States are women-owned, with 89.5% of them being nonemployer businesses.

It is up to the courts to determine whether this is a form of direct discrimination or a side effect of all small businesses being shut out of the PPP in favor of national brands.  

Early Resolutions Have Gone Against Small Business Owners

Some plaintiffs are willing to wait until after the courts open, but other PPP lawsuits are already closing. One judge in Baltimore ruled against small businesses in a discrimination-based case.

In this suit, the small businesses claimed that Bank of America restricted applicants who didn’t already have a banking or borrowing relationship with the company. This delay prevented the business owners from applying for a PPP loan before the funds were used up.  

Judge Stephanie A. Gallagher explained that the CARES Act does not have any amendments that allow private parties to bring lawsuits against banks and government organizations. “Nothing in its text evidences Congress’s intent to enable PPP loan applicants to bring civil suits against PPP lenders, to enforce that right,” she says. 

This understanding means that while Bank of America and other lenders might not have done the right thing in processing loans by business size, rather than on a first-come-first-serve basis, plaintiffs may not have much of a case against them.  

More PPP Funding

For small business owners who were not able to get their PPP applications approved, there is more funding coming. On Friday, April 24, President Trump signed a $484 billion relief package that includes $310 billion for the PPP. Now that it has been approved, it will provide coverage for small business owners who missed their chance during the first round of funding. 

If you run a small business and are interested in the PPP, use Lendio to find an SBA lender who can help get you the funds needed to weather the coronavirus. The second round of PPP funding is likely to go just as fast as the first, so don’t delay.


While every effort is made to ensure the accuracy of information when a story is published, the coronavirus pandemic and Paycheck Protection Program (PPP) have caused details to change at a rapid pace. Additional guidance from the government may change or clarify certain aspects of the forgiveness process and could result in changes to the information contained in these pages. For the most up-to-date information, please visit the COVID-19 section of our website. For more information, you can call us at (855) 853-6346. Lendio is not responsible for and provides no warranty as to the accuracy of this content. Lendio does not provide legal, accounting or tax advice. The information and services Lendio provides should not be deemed a substitute for the advice of such professionals who can better address your specific concern and situation.

Derek Miller

Derek Miller is the CMO of Smack Apparel, the content guru at Great.com, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy, Score.org, and StartupCamp.