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Hedge funds and private equity firms are ineligible for small business rescue loans, the Trump administration said Friday.
The Small Business Administration tightened the rules of the Paycheck Protection Program, which Congress created last month to help keep small businesses afloat during the coronavirus pandemic. The federal government will forgive the low-interest loans if at least 75 percent of the money goes toward maintaining payroll.
But there’s been a fierce backlash against the program after the initial $350 billion in funding was depleted within two weeks and it was revealed that big companies, some with market valuations higher than $100 million, and national chain restaurants had tapped the aid -- even as small business owners languished.
“Hedge funds and private equity firms are primarily engaged in investment or speculation, and such businesses are therefore ineligible to receive a PPP loan,” the SBA said in an update posted online.
The Trump administration issued similar guidance on Thursday, urging publicly traded companies that had secured loans to explore other sources of funding and to return any money that it had already received. If borrowers accessed the aid before the Treasury issued the new guidance and repay the entire loan before May 7, 2020, it “will be deemed by SBA to have made the required certification in good faith.”
Late Thursday, Ruth’s Chris Steak House said it returned $20 million it received from the program, echoing a similar decision by Shake Shack to cancel its $10 million loan earlier in the week.
Although the program’s funds evaporated last week, President Trump on Friday signed into law a bill approving an additional $310 billion to replenish it. Loans will be available starting Monday, according to Sen. Marco Rubio.
Rubio, the chairman of the Senate Small Business Committee, made the announcement Friday morning on Twitter. The program will also have "an additional significant amount of money" from loans being returned by big companies, the Florida Republican said.
"We already know of hundreds of millions of dollars potentially that are being returned," he said. "Some of these big companies you read about that got PPP, that was never the attention, have started to return the money. That money will be added on to whatever Congress appropriated."