SBA suggests big companies return funds
WASHINGTON — With Congress preparing to approve more than $300 billion in new funding for a small-business loan program, the Small Business Administration issued new guidance Thursday that suggested that dozens of publicly held companies that had previously received money under the program should return the funds by May 7.
The SBA’s original $349 billion Paycheck Protection Program contained only a vague requirement that businesses agree that “current economic uncertainty makes this loan request necessary,” but the new guidance was more explicit and said companies that had other sources of cash probably would not qualify.
“All borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application,” the guidance states. “Borrowers still must certify in good faith that their PPP loan request is necessary.”
The guidance states that borrowers “must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”
“For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification . ... Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020, will be deemed by SBA to have made the required certification in good faith.”
More than 80 publicly traded companies in an array of industries, including big hotel owners, restaurant chains, energy companies and manufacturers, received PPP money. Some of the companies are worth hundreds of millions of dollars based on their share values, and many pay executives seven-figure compensation packages. Others have boosted their share prices in recent years through share buybacks and dividend payments.
When the money ran dry last week, news that many large corporations had received loans sparked criticism from smallbusiness advocates and policymakers from both parties. A handful of the chain restaurants announced that they would forgo the money, including Shake Shack, Kura Sushi USA and Sweetgreen, which is privately held.
On Thursday, Ruth’s Chris Steak House, a chain that has 150 locations and is valued at $250 million, agreed to return the $20 million it had received, according to CNBC.
Some of the companies receiving money are clients of JPMorgan Chase, adding fuel to criticism that Wall Street banks had helped their clients obtain large amounts. The bank put out a statement Sunday saying that it is “proud to have secured more funding for small businesses than anyone else in the industry” and that 80 percent of its PPP loans have been for businesses with less than $5 million in revenue.