WASHINGTON - Millions of dollars in aid intended to help small U.S. businesses survive during the coronavirus pandemic actually were disbursed to much larger companies, investment banker Morgan Stanley has concluded, but U.S. officials are hoping a new small business aid plan will prevent that from happening again.
Morgan Stanley says that at least $243.4 million of the $349 billion in aid approved for small businesses last month as part of the country’s $2 trillion coronavirus rescue package went to companies whose stocks are traded publicly on U.S. exchanges.
The money was intended for small mom-and-pop operations, such as restaurants and shops with fewer than 500 employees that have been shut by the stay-at-home edicts issued by 43 of the country’s 50 state governors to prevent the spread of the coronavirus.
But, in a quirk in the way the law was written, individual franchises of major national companies with thousands of workers throughout the country were able to tap into the fund, angering lawmakers who had approved the legislation thinking they were only helping small businesses.
The money was intended to give enough money to small businesses to let them keep paying some of the 22 million laid off workers in the U.S. over the next two months, with the government picking up the cost if it was used in that time frame and to pay salaries.
Shake Shack returned money
But at least 75 companies whose stock is publicly traded, some of them with assets of more than $100 million, have filed reports with the country’s Securities and Exchange Commission saying they tapped the small business loan program before it ran out of money last week.
Among the companies who benefited were DMC Global, a metal working business with a stock market value of $405 million, Wave Life Sciences, a biotechnology company worth $286 million, and the Fiesta Restaurant Group, a chain of Caribbean- and Mexican-themed restaurants worth $189 million.
After lawmakers assailed how some of the money ended up in the hands of large companies, hamburger chain Shake Shack returned its $10 million grant to the government earlier this week, but no other companies have announced that they intend to give back the funds.
The U.S. Small Business Administration, which has been administering the program, said last week that 4,400 of the approved loans exceeded $5 million, although the typical loan was $206,000.
More funds in the works
The Senate on Tuesday approved another $484 billion coronavirus rescue package that includes $310 billion more for small businesses. The House of Representatives is expected to vote on the legislation on Thursday and President Donald Trump says he will sign it.
Treasury Secretary Steven Mnuchin said that larger companies would be prohibited from tapping the new fund for more rescue money. Trump has called on big companies who received grants from the earlier depleted fund to return the money to the government.