Corporations are under fire for accepting stimulus loans earmarked for struggling small businesses.
After the names of publicly traded companies which had received funds under the Paycheck Protection Program (PPP) started making headlines, Secretary of the Treasury Steven Mnuchin warned that the program was not intended for these kinds of companies, stating that the companies would be penalized unless they gave the money back.
The PPP was designed to assist the millions of small businesses who have been forced to close due to social distancing lockdowns — but the hastily conceived program left thousands of applicants high and dry after funds ran out in less than two weeks.
An investigation revealed that more than 90 public companies, each worth far more than $100 million, and whose executives are also worth millions, received more than $365 million intended for small businesses.
Ruth’s Hospitality Group, which owns the Ruth’s Chris Steak House brand, operates more than 100 steakhouses across the United States, Canada, and Mexico. It managed to secure two $10 million loans, one for each of its subsidiaries. With fewer than 500 employees at each location, the company felt that it met the eligibility requirements for the loan.
After the chain was criticized and pressured by the Small Business Association (SBA), Ruth’s Chris Steak House announced that it will return the $20 million loan.
The SBA issued an advisory that companies must certify that current economic conditions make the loan necessary to support their ongoing operations. Given that public companies have access to capital markets, the SBA says it is unlikely they “will be able to make the required certification in good faith.”
For instance, Shake Shack, another large restaurant chain that got a loan under the program, said it would return the $10 million it had received after it was able to raise more than that amount in the equity market.
The Small Business Administration said any company that gives the money back before May 7 will be deemed to have acted in good faith. Congress finished approval of $484 billion in additional funding for small businesses and hospitals on Thursday, April 23, 2020.