The Source

Who you know matters, even when applying for PPP loans

In the chaos of the early weeks of the COVID-19 pandemic, the Paycheck Protection Program (PPP) was a lifeline for many struggling businesses. It provided government-guaranteed, forgivable bank loans to businesses with less than 500 employees to cover payroll, and expenses. However, many small businesses were shut out while larger companies and franchises received millions in forgivable loans.

New research conducted by GSEM Professor Roni Michaely, with researchers from Washington University, and Boston College has exposed how, with little oversight or accountability, lenders prioritized PPP loan applications from businesses with prior lending relationships or personal connections to bank executives by 57% in the early stages of the program.

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