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Less than two weeks ago, the federal government launched the $349 billion Paycheck Protection Program, aimed at keeping small businesses afloat as the coronavirus pandemic forces an unprecedented shutdown of the nation’s economy.
Among those that qualified for the loans — businesses with fewer than 500 workers may borrow up to 2 1/2 times their payroll, or up to $10 million — is Potbelly Sandwich Shops, a Chicago-based chain with restaurants throughout the country.
On April 10, the sandwich shop secured a $10 million loan from JPMorgan Chase through the program at an interest rate of 0.98 percent, according to a new regulatory filing. The company said the money will go toward “qualifying expenses” in the Securities and Exchange Commission filing.
The money can be used for payroll and other expenses, like insurance premiums, mortgages, rent or utilities through June 30. The loans, which are guaranteed by the federal government, will be fully forgiven if 75 percent of the money goes toward keeping workers employed and maintaining salary levels, according to the Small Business Administration. If the headcount declines, or salaries and wages decrease, forgiveness will be reduced.
Payroll costs are capped at $100,000 on an annualized basis for each employee, according to the Treasury Department.
Four days before obtaining the loan, Potbelly promoted an internal employee to the role of senior vice president, chief financial officer and chief strategy officer, effective April 6, according to the filing.
Steven Cirulis, who had worked for the company since December 2019 in a “strategic planning, finance and analytical consulting role,” will be paid an annual one-time cash signing bonus of $100,000 for the promotion, according to the filing.
Cirulis’s annual base salary is $425,000, although the company announced on March 30 that it would temporarily reduce senior executive pay by 25 percent as a result of the virus outbreak. The reduction, referred to as the “Corona Cut,” will continue indefinitely “until removed at the sole discretion of the Company for all senior executives,” the filing said.
Potbelly did not immediately respond to a request for comment.
More than 1.34 million loans worth nearly $296 billion have been approved by 4,800 lending institutions as of Wednesday afternoon, according to the SBA. If the current trend in demand for loans continues -- one week ago, about $50 billion in loans had been processed; that jumped to $160 billion by Friday -- the program could be close to running out of money by Friday.
Although there’s bipartisan agreement that the PPP needs additional funding, Senate Democrats last week blocked a measure that would have replenished the fund with an additional $250 billion from being passed, pushing for more emergency funding for hospitals and states as well as some changes to the small business aid program.
Despite the popularity of the program, it’s been riddled with glitches and banks have reported an overwhelming rush of applications. Just 2 percent of small businesses in New York, the American epicenter of the virus, have been approved for relief through it, according to data obtained by the Times Union.
In New York, 40,975 loans totaling more than $11.7 billion were approved for small businesses, the Times Union reported. It’s unclear how many businesses in the state applied for the forgivable loans.
Close to 812,000 people filed for unemployment over a four-week period in New York, a stunning 1,446 percent increase from the year-ago period. Across the country, over the past four weeks, more than 17 million Amerians have filed first-time unemployment benefits, a stunning sign of the depth of the economic calamity inflicted by the virus.