Government is pressuring state-owned enterprises to repay loans
NEW YORK (AP) – Large state-owned enterprises that received loans under a government program intended to help small businesses devastated by the coronavirus epidemic could be forced to return it.
The Small Business Administration on Thursday issued a notice clearly aimed at companies like Chris Steak House and Potbelly of the Ruths restaurant chains that have received loans under the Paycheck Protection Program. The guidelines imply that unless a business can prove it was truly eligible for a loan, the money should be returned by May 7.
The PPP, launched on April 3, aims to help small businesses with fewer than 500 employees stay afloat. The program’s initial $ 349 billion funds ran out last week. Congress was debating $ 310 billion in additional funds on Thursday.
Earlier this week, an Associated Press investigation documented how dozens of publicly traded companies collectively received hundreds of millions of dollars in loans from the program’s first round. According to data compiled and analyzed by AP, as of Monday, at least 94 publicly traded companies said they had received $ 365 million since the program opened on April 3. Some had market values well over $ 100 million. Many had executives who were paid millions each year.
At least one big company, the hamburger chain Shake Shack, has announced that it will return the $ 10 million it got after a quick reaction from the public.
The new SBA guidelines require businesses to certify with their lender that they need the loan and cannot access the money from other sources. Given that state-owned enterprises have access to capital markets, the SBA says it is unlikely that they “will be able to perform the required certification in good faith.”
The program’s original rules allowed large businesses such as restaurants and hotels with fewer than 500 workers per site to apply for loans.
The program approved more than 1.7 million loans. It is clear from SBA data released last week that the agency approved large loans at the start of the program, including those that went to large corporations. As of April 13, the average loan amount was nearly $ 240,000, while as of April 16, it had dropped considerably to $ 206,000 – the result of many other small loans that were likely made to small ones. companies.
These large loans meant less money was available for small businesses, including thousands of applications still pending when the money ran out.