US treasury toughens guidance on who can get small-business funds
Small businesses complained that large companies such as Shake Shack were getting loans while they were shut out.
Companies seeking aid from the next round of small business relief will be required to attest to their needs for the loan and could be asked to prove it, as the Trump administration seeks to prevent larger firms with other funding options from crowding out mom-and-pop operations.
Treasury Secretary Steven Mnuchin has said the fund is intended for small businesses, and new guidance from Treasury and the U.S. Small Business Administration released Thursday emphasizes that companies must “certify in good faith” the economic need for a loan under the Paycheck Protection Program, or PPP.
The guidance was issued after small businesses complained that large, publicly traded companies and big chains such as Shake Shack Inc. were getting loans while they were shut out in the initial $349 billion in funding for loans. That money ran out in just 13 days and the U.S. House is expected to vote today on a relief bill for the program that includes an additional $320 billion, allowing for $10 billion in bank fees and processing costs.
“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 guidance says.
Lenders may rely on a borrower’s certification, and borrowers that previously applied for a PPP loan and repay it in full by May 7 “will be deemed by SBA to have made the required certification in good faith,” according to the guidance.
Restaurant chains Shake Shack and Sweetgreen Inc. returned their PPP loans. Mnuchin has encouraged other companies that “may have not been clear in understanding the certification” to do the same, and he’s also said companies that took funding and didn’t really need it could be “subject to investigation.”
Republican Senator Marco Rubio of Florida tweeted on Monday that “any company that doesn’t need a PPP loan but got one made a false representation.” He also announced that the Senate Committee on Small Business and Entrepreneurship that he leads will conduct “aggressive oversight” of the program this fall, including subpoena power to determine whether companies made false certifications to obtain loans.
The PPP offers loans of as much as $10 million that convert to grants if proceeds are used to keep workers on the payroll and cover rent and other approved expenses for about two months, a stopgap designed to help businesses get by until the economy reopens. The $349 billion allocated from the $2.2 trillion relief package enacted last month for the PPP program ran out on April 16 after just 13 days.
Dallas hotel executive Monty Bennett, who is also a major donor to President Donald Trump has emerged as the biggest winner from the coronavirus bailout for small businesses. A combined total of $59 million from the small business lending package went to three lodging companies chaired by Bennett, according to regulatory filings.