Public companies tapping small-business loans may not have met necessary certifications, Mnuchin says
When Congress created the $349B program, it directed the loans at companies with fewer than 500 employees
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Treasury Secretary Steven Mnuchin on Wednesday questioned whether some big companies receiving millions of dollars in government-backed loans from a program created to help small businesses have met the necessary certifications.
"I think a lot of these big companies [it's] questionable whether they could make that certification," Mnuchin told FOX Business' Stuart Varney. "I think they should review it."
At least 75 publicly traded companies -- some with market values well over $100 million -- tapped the government-backed Paycheck Protection Program, receiving a combined $300 million in low-interest loans, according to a recent Associated Press analysis.
The loans were among the 4,412 approved by banks and the Small Business Administration worth $5 million or more, according to SBA data. The total amount of loans approved for at least $5 million totaled $30.9 billion — or about 9 percent of all those approved. The size of the typical loan nationally was $206,000, according to the data.
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When Congress created the $349 billion program, it directed the loans at companies with fewer than 500 employees. But restaurants and hotels were granted some flexibility in the legislation — so long as they employed no more than 500 workers at any single location, they could apply for the aid.
The money can be used for payroll and other expenses, like insurance premiums, mortgages, rent or utilities through June 30. As long as 75 percent of the money goes toward keeping workers employed and maintaining salary levels, the loans, which are guaranteed by the federal government, will be fully forgiven.
if large companies took a loan through the Paycheck Protection Program despite not meeting the certifications, Mnuchin said they can pay the money back "quickly" to the Treasury Department and Small Business Administration with no liability.
"If they don't," he said, "They could be subject to investigation."
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The backlash against the program began this week, after national restaurant chains that employed thousands of workers before the crisis secured millions of dollars in small-business loans. Among the companies were Potbelly Corp., the nationwide sandwich shop chain, and Ruth's Hospitality Group, which operates a series of steakhouses.
On April 10, Potbelly secured a $10 million loan from JPMorgan Chase through the program at an interest rate of 0.98 percent, according to a regulatory filing. The company said the money will go toward “qualifying expenses.” Ruth’s said in an SEC filing that two of its subsidiaries were granted loans on April 7 by JPMorgan for a total of $20 million. The money will go primarily toward payroll costs, it said. Under the program, the maximum loan a company can receive is $10 million or up to 2.5 times its operating cost.
Facing growing anger, Shake Shack said Monday it will return the $10 million loan it received, making it the first major firm to give back the money intended to protect small businesses. The burger chain runs close to 189 restaurants in the U.S., with about 45 employees in each location. In 2019, it reported revenue of roughly $600 million.
The Senate passed a $484 billion aid package on Tuesday, which includes an additional $310 billion in funding for the small-business program, which ran out of money last week.
"I hope it is enough," Mnuchin said, adding: "I hope we are going to get back to work quickly...We ‘re kind of operating under the environment that we are going to open up parts of the economy. We are looking forward to, by the time we get later to the summer, having most of, if not all of, the economy open."