The Trump administration is warning large corporations that got government loans intended to help small businesses hurt by the coronavirus pandemic that they may have to return the money.
The Small Business Administration issued a new advisory Thursday saying all businesses need to consider whether “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”
"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 SBA added.
It says unless a company can prove it is eligible for a loan, it has to give back whatever cash it received by May 7.
The SBA’s Paycheck Protection Program is intended to help businesses with fewer than 500 employees avoid having to close for good after COVID-19 forced them to close their doors and lay off workers. But the law allowed large restaurant and hotel chains to ask for help.
Several large chains with deep pockets, including the upscale Ruth’s Chris Steak House and Shake Shack hamburger eateries, were granted loans.
Shake Shack promised to return the $10 million it received, and Ruth’s Chris said it is sending back the $20 million it borrowed.
The steakhouse chain said Thursday that it still believes it was entitled to the money.
“We were eligible for this assistance, and our goal was to utilize funds to keep as many of our team members working for as long as possible, cover 100% of health care benefits and position Ruth’s Chris to rebuild its workforce as quickly as possible,” it said.
The Associated Press says its investigation revealed that more than 90 public companies each worth far more than $100 million, and whose executives are also worth millions, received more than $365 million intended for small businesses.
The initial $349 billion in the program has run out, in part, because some big companies were approved. Congress finished approval of $484 billion in additional funding for small businesses and hospitals Thursday.
Senator Ben Cardin, the top Democrat on the Small Business Committee, said the SBA’s new guidance is a “welcome step in the right direction to ensure that the most vulnerable small businesses can receive the capital they need.”
But some critics say the new guidance does not change the rules that allow large companies to apply for loans.
