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Congress is poised to approve an extra $310 billion in new funds this week for a tapped-out program intended to help small businesses survive the coronavirus pandemic — but the new package could include language that allowed publicly owned companies to secure the government-backed aid.
When Congress created the $349 billion Paycheck Protection Program in the economic relief plan last month, it directed the loans to companies with fewer than 500 employees. But restaurants and hotels were granted some flexibility in the legislation — as long as they employed no more than 500 workers at any single location, they could apply for the aid.
That loophole included in the $2.2 trillion CARES Act — “per physical location” — will be carried over to the new legislation, according to Bloomberg News, which obtained a copy of the proposal.
“During the covered period, any business concern that employs not more than 500 employees per physical location” that is part of the hospitality sector “shall be eligible to receive a covered loan,” the legislation reads. It does not specify whether individual locations or franchise owners must apply for the aid or whether corporate headquarters can apply for millions of dollars in relief.
In its haste to provide life support to small businesses, Congress did not exclude publicly traded companies or limit market value in the program. Regardless of how much cash a company had in the bank, if the business could show any loss as a result of the virus outbreak, it qualified for a small business loan through the PPP, according to an SBA source.
That opened the program to a slew of big firms that could have received help via different avenues, like the Federal Reserve.
At least 75 publicly traded companies -- some with market values of 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.
Facing mounting anger, Shake Shack this week announced it would return a $10 million loan, which will be reabsorbed into the program and distributed with the second wave of aid.
But other national chain restaurants that reported employing thousands of workers before the pandemic, including Potbelly Corp., the nationwide sandwich shop chain, and Ruth's Hospitality Group, which operates a series of steakhouses, tapped the loan program.
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.
Treasury Secretary Steven Mnuchin said the agency will be releasing additional guidelines as soon as Wednesday on necessary certifications that companies need to meet in order to obtain the money.
"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."