The Small Business Administration issued new guidance on Thursday making it less likely that big publicly traded companies can access the next round of funding for the U.S. government's small business relief program. It also stepped up pressure on public companies that have tapped funds to return the money.
The update comes after a public furor that large companies tapped the facility, known as the Paycheck Protection Program, for hundreds of millions of dollars in loans while thousands of small businesses have yet to receive funding.
Companies applying for the coronavirus relief funds must certify that the loans are necessary and that they cannot tap other sources of money, the SBA said. By definition, public companies have access to the capital markets. For instance, Shake Shack said it returned the $10 million it got through the PPP after it sold $150 million in new shares.
"Borrowers still must certify in good faith that their PPP loan request is necessary," the SBA said. "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."
The change comes as a second round of funding for PPP, after the initial $350 billion was depleted last week, is set to be approved by lawmakers later Thursday. The program is set to get $310 billion in fresh funds, and industry executives have said that even this amount will likely last only days. There is no guarantee that lawmakers will approve more money for the program after that. While the spirit of the PPP, a key component of the Trump administration's $2 trillion-plus economic response to the coronavirus pandemic, was to help small businesses, the rules during the program's initial round allowed large restaurant and hotel companies to apply for loans of up to $10 million.
When that happened, and companies including Ruth's Chris Steakhouse and Potbelly Sandwich Shop were revealed to have used the program, small business owners became incensed. Read more...
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