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Now a picture is emerging of who got the money. More than 25% of the total pot went to fewer than 2% of the firms that got relief. They include a number of publicly traded companies with thousands of employees and hundreds of millions of dollars in annual sales.
The loans from the U.S. Small Business Administration - totaling $342.3 billion as of Thursday - went to companies in all 50 states, the District of Columbia and five U.S. territories, and were spread across all 20 of the main industry sectors.
Congress directed the SBA to award $349 billion to struggling businesses with 500 or fewer workers as part of a $2.3 trillion coronavirus aid package that President Donald Trump signed into law on March 27. The Payroll Protection Program (PPP) was crafted to keep Americans off unemployment benefits, by giving small and mid-sized companies forgivable loans for keeping employees on the books.
The SBA does not make the loans directly but instead backs loans made by participating financial firms.
The three biggest state economies - California, Texas and New York - accounted for 23% of the loans, more than $82 billion. Meanwhile, businesses in a number of small, rural states that have avoided the brunt of the outbreak took home a disproportionate share of the pie.
The business sector receiving the most money was construction, with 13% of the total. The sector represents less than 9% of overall employment among U.S. firms with 500 or fewer employees, according to U.S. Census Bureau data from 2017, the latest available.
Companies on the front line of the virus - in the accommodation and food services sector - received about 9% of the pot while representing nearly 14% of workers among sub-500 person firms.
MAIN STREET? WALL STREET?
Loans of $2 million or more made up nearly 28% of the total, and those of at least $5 million accounted for 9%, with a number of those going to companies with access to public securities markets.
At least 60 publicly traded firms have claimed a share of the total, according to Securities and Exchange Commission filings. There is no prohibition in the CARES Act against money going to publicly listed firms.
Some - including the holding companies for well known restaurant chains Shake Shack and Ruth’s Chris Steak House - appear to have taken advantage of a provision in the CARES act that allows companies with more than 500 workers overall to get loans.
The exemption allows for businesses in the accommodation and food services industry to participate so long as they do not exceed 500 employees per physical location.
Shake Shack Inc, Ruth Hospitality Group Inc, Potbelly Corp and Fiesta Restaurant Group’s Texas Taco Cabana all borrowed $10 million under the program through JP Morgan Chase & Co, SEC filings show.
Hallador Energy Co, which operates coal mines, received $10 million from First Financial Bank.
All have more than 500 employees.
Shake Shack has closed 63 of its 120 locations worldwide, and furloughed or laid off more than 1,000 employees after sales fell 28.5% in March, it said in a filing April 17. It was unclear how many of its 100 U.S. stores remain open, but filings showed that it employed 7,600 at the end of 2019. The company, which generated $595 million in sales and a $20 million net profit in 2019, said it will continue to pay all general managers and cover all employees’ health insurance.
Texas Taco Cabana operates 164 outlets from Houston to Albuquerque. Fiesta, which also runs a chain of chicken restaurants in Florida and posted $661 million in sales last year and a net loss of $84.4 million, employed 10,480 at the end of 2019. It did not immediately respond to an inquiry about the number of employees that would be covered under the loan.
Potbelly had 474 shops in 32 states, including 48 franchisees, and employed 6,000 people at the end of 2019, filings showed. Sales last year totaled $410 million, though it posted a net loss of $24 million.
“Every penny will be used to financially support the employees in our shops,” said Potbelly’s Chief People Officer Matt Revord.
Hallador employed 768 as of February 2020, its filings showed. It did not immediately respond to an email seeking comment.
SMALL STATES, BIG WINS
With the PPP funds depleted as of this week, further aid has stalled in Congress amid a partisan dispute over support for state governments and hospitals.
The economic pain of coronavirus-related shutdowns has been felt throughout the country. The SBA’s loans appeared to reach a greater proportion of businesses in Republican-leaning states that have imposed the lightest restrictions on business and have had relatively few confirmed coronavirus cases.
SBA awarded 583 loans for every 1,000 businesses in North Dakota, according to a Reuters analysis of SBA and Census Bureau data. In California, SBA loans only reached 149 of every 1,000 businesses.
The SBA has not released data on the number of firms seeking loans, either overall or in each state, so it is unclear what contributed to the higher proportion of businesses in so-called “red states” getting loans.
“I’m hard pressed not to think this is political. Blue states like California got a pathetic number of loans issued,” Representative Jackie Speier, a California Democrat, said on Twitter.
Others said the disparity was due to the different types of lenders involved.
Smaller banks, which have a greater presence in rural areas, were ready when SBA launched the program on April 3, while many larger banks and nonbank lenders were not able to participate until the following week.
“The bankers here, they know the farmer, they know the barber, they know the cafe owner,” said Republican Representative Jeff Fortenberry of Nebraska, where SBA loans reached 558 of every 1,000 businesses.