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The Treasury Department said Thursday that wealthy public companies likely do not meet the necessary certifications to tap government-backed loans intended to help small businesses weather the coronavirus pandemic.
“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification,” the Treasury said in new online guidance about the Paycheck Protection Program.
The agency told businesses to take into account their “current business activity and their ability to access other sources of liquidity” to support their operations before turning to the PPP. 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.”
Treasury Secretary Steven Mnuchin told FOX Business on Wednesday that if businesses that don’t meet the necessary certifications received loans and do not repay it, they could be subject to investigation.
When Congress created the $349 billion Paycheck Protection Program in the stimulus plan approved last month, it targeted 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.
That opened the program to a slew of big firms that could have received help via different avenues, like the Federal Reserve.
The result has been a growing backlash over the program, which granted multimillion-dollar loans to major restaurant chains like Potbelly, Ruth’s Chris Steak House and Shake Shack (which announced this week that it would return the $10 million), even as small business owners struggled to access the aid.
At least 75 publicly traded companies — some with market values of well over $100 million — tapped the government-backed loans, 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.
Although the program’s funds evaporated last week, lawmakers are poised to approve an additional $310 billion to replenish it. The new package is expected to include language from the previous legislation that allowed publicly traded companies to secure the cash.
The Senate passed the aid package Tuesday. The House is expected to vote Thursday, and President Trump could sign it into law as soon as that evening.