Among the considerations businesses must weigh is their ability to access other sources of money, the SBA said. | Kena Betancur/Getty Images
The Trump administration on Thursday warned large, publicly traded companies to think twice before applying for small business rescue loans amid a growing furor over Wall Street-backed firms receiving the money.
In an updated document for the Paycheck Protection Program, the Small Business Administration said all borrowers should consider the certification they must make when applying for loans that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”
Among the considerations businesses must weigh is their ability to access other sources of money, the SBA said.
“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 agency said.
The guidance doesn’t change the formal rules of the program and wouldn’t necessarily stop large companies from continuing to seek the aid. But it marked the SBA’s first public response to revelations that big public companies including Shake Shack, Ruth’s Hospitality Group and Potbelly were among the first businesses to receive the government-backed loans, which were intended to fight layoffs during the Covid-19 outbreak.
Shake Shack said it will return its $10 million loan — after it raised about $150 million in the market.
The program’s initial $350 billion in funding ran out a week ago. The House on Thursday will likely pass another $320 billion in funding after the Senate passed the legislation Tuesday.
The loans, which can be forgiven if a business maintains its payroll, were aimed at businesses with fewer than 500 employees, but the law included exemptions for larger restaurant and hotel operators to access the money as well.
The SBA indicated it would not apply the new guidance to loans that have already been requested.
“Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith,” the agency said.
SBA warns big companies on seeking small business loans after backlash
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