Large Companies Access $365M in Loans Intended for Small Business
The Small Business Administration (SBA) issued new guidelines today, making it less likely for the larger companies to access the next round of funding for the small business relief program. The SBA also increased pressure for public companies to give back any money they received.
This comes after public outcry of unfair practices that saw publicly traded companies apply for loans reserved for small businesses. Loans such as the Paycheck Protection Program (PPP) saw millions of dollars going to large corporations, while small business owner were waiting to receive a single dollar! Large restaurant chains “ate up” approximately $30 million in federal loans meant to help struggling small businesses during the COVID-19 crisis. These companies included, Potbelly Sandwich Shop and Ruth’s Chris Steak House. Both successfully applied for and received millions under the $349 billions stimulus package.
Companies applying for the COVID-19 relief funds must certify that the loans are necessary and that they have no means to other sources of funding, the SBA said. Typically, public companies indeed, have access to the capital markets, making them technically, not able to qualify for these loans. In one example, Shake Shack stated it returned the $10 million it received through the PPP shortly after selling $150 million in new shares.
All this after a recent data breach within the SBA loan portal, that exposed data for thousands of small business owners and just before a second round of funding for PPP, set to replenish the $349 billion depleted just a week ago. The program is geared to obtain $310 billion in new funding. Industry experts believe that even this amount will likely last only days. At this moment, there is no guarantee that lawmakers will move ahead to approve additional money for the program after this.