Large public companies that received loans under a government program intended to help small businesses devastated by the coronavirus outbreak could be forced to return it.
The Small Business Administration issued an advisory Thursday clearly aimed at companies like restaurant chains Ruths’ Chris Steak House and Potbelly that received loans under the Paycheck Protection Program. The guidelines imply that unless a company can prove it was truly eligible for a loan, the money should be returned by May 7.
The PPP, which launched April 3, is intended to help small businesses with fewer than 500 employees stay afloat. The program’s initial $349 billion in funds ran out last week. The House gave final approval to $310 billion in additional funds Thursday.
At least 147 publicly traded companies disclosed receiving $555 million since the program opened April 3. Some had market values well over $100 million. Many had executives that were paid millions each year.
After a swift public backlash, several companies have announced they’re returning their loans, including New York-based burger chain Shake Shack, which got a $10 million loan, and Kura Sushi, which is based in Irvine, California, and got nearly $6 million. A third company, Boston-area biotechnology company Wave Life Sciences USA Inc., says it started the process to repay the $7.2 million loan it received.
“We made this decision after the SBA issued new guidance that states, in effect, that public companies are not appropriate recipients of these loans,” the company said Thursday.
The SBA’s new guidelines require companies to certify with their lender that they need the loan and cannot access the money from other sources. Given that public companies have access to capital markets, the SBA says it is unlikely they “will be able to make the required certification in good faith.”
The initial rules of the program allowed bigger companies such as restaurants and hotels with under 500 workers per location to apply for the loans. Read the full story.
