By Sandra G. Leon
(Updated April 22, 2020 at 8:01 pm)
The emergency loan program that was targeted to help small businesses retain workers during the COVID-19 crisis tapped out its $349 billion after approving over 1.6 million loans, but some of the loans went to large publicly-held corporations that have access to debt and the stock market.
Known as the Paycheck Protection Program (PPP), the loans were part of the $2.2 trillion relief package passed by Congress and signed by President Trump in March. The program was targeted to help businesses retain workers so they would not be fired or furloughed during the crisis.
Although over a million small loans were approved for small businesses, critics have pointed to several large loans given to publicly-held corporations and institutions that have other access to capital based on their value or reserves. Over 4,000 of the approved loans were for $5 million or more.
For example, Shake Shack restaurants received a $10 million loan and Ruth’s Chris Steakhouse restaurants claimed a $20 million loan. Both companies are publically traded and can borrow against their stock or sell more shares to raise money in the market. DMC Global, an oil and gas company valued at over $400 million, received a $6.4 million loan.
The single largest loan, at $15.1 million, went to J. Alexander’s Holdings, a restaurant group with locations in Florida, Georgia, Texas, and several Eastern and Midwestern states. The publicly-traded company’s market value is $74 million.
The Small Business Administration (SBA) is no longer accepting applications for relief loans since the funding has been exhausted.
“The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations,” said SBA spokeswoman Jennifer Kelly. “Similarly, we are unable to enroll new PPP lenders at this time.”
On Sunday, Shake Shack released an open letter signed by both its CEO and its Chairman of the Board, claiming the company will immediately return the $10 million it received. Shack Shakes public financial reports show it has at least $100 million of cash on hand and can access loans, lines of credit, and sell shares to raise cash if needed.
Congressional leaders are currently negotiating on a new $450 billion relief package that would include $310 billion for additional PPP loans, including $125 billion to be sent “exclusively to the unbanked, to the minorities, to the rural areas, and to all of those little mom and pop stores that don’t have a good banking connection and need the help,” Senate Democratic Leader Chuck Schumer said.
Correction: An earlier version of the story claimed that Harvard University had received $8.7 million in relief funding. US Treasury Secretary Steven Mnuchin has since clarified that Harvard was awarded an $8.6 million grant from the US Department of Education. Our reporting was based on information available at the time.