Potbelly Corporation, which owns more than a dozen sandwich shops in New York, will repay its $10 million federal loan after outcry from small business advocates and updated federal government guidelines on which businesses qualify for loans.
“Potbelly’s sales dropped dramatically when COVID-19 hit, forcing us to lay off employees, close stores and dramatically cut salaries at all levels of the organization,” the company said. . said in a statement on Saturday. “In order to financially support our store employees, and based on SBA guidelines, we have applied for and qualified for assistance under the Payroll Protection Program.”
The $350 billion in funds for the first round of PPP loans dried in two weeks. The program was intended for employers with fewer than 500 employees, but a provision in the program allowed larger companies, such as Potbelly and Shake Shack, to qualify because each location had fewer than 500 employees.
“We were surprised and disappointed when the fund was quickly depleted, leaving many people without help,” Potbelly’s statement continued. “We are repaying the PPP loan after further clarification from the Treasury Department. We will continue to seek alternatives to help support our employees and get them back to work so they can serve our loyal customers.”
Potbelly said he would repay the loan after the Treasury Department and the Small Business Administration said in updated guidance that large publicly traded companies with access to capital markets may not be able to prove that loan application is required.
“Borrowers should make this certification in good faith, taking into account their current business activity and their ability to access other sources of sufficient liquidity to support their ongoing operations in a manner that is not materially detrimental to the company”, according to SBA and Treasury Department guidelines.. “For example, a public company with substantial market value and access to capital markets is unlikely to be able to make the required certification in good faith, and such a company should be prepared to demonstrate to the SBA, on request, the basis of its approval.
Shake Shack said he would come back a $10 million loan early last week. Ruth’s Hospitality Group, owner of Ruth’s Chris Steakhouse, is also repaying $20 million in loans it received, according to CNBC.
The PPP loans are intended to help businesses with fewer than 500 employees amid massive job losses during various stay-at-home policies due to the coronavirus. Job losses set to plunge New York into economic crisis not seen since the 1970sand the loss of tax revenue should slash town and state budgets billions to compensate.
Last week, Congress spent another $310 billion to replenish loan program funds, with $60 billion earmarked for small and medium-sized banks and credit unions to help small businesses without previous relationships with large banks access liquidity. But the Consumer Bankers Association said Thursday the funding is probably already exhausted due to the number of applications submitted in the first round.
PPP loans have also prioritized wealthier customers, according to various bank employees and financial industry executives. who spoke with the New York Times. Owners with at least $10 million in assets or JPMorgan’s commercial banking customers were able to opt out of an online portal, for example, in what one person described to The Times as ‘concierge treatment’ .
Sen. Chuck Schumer and two other senators have asked the SBA Inspector General to investigate these concerns.
The SBA will begin accepting loan applications Monday at 10:30 a.m., according to Treasury Department Secretary Steven Mnuchin and SBA Administrator Jovita Carranza. PPP loans have helped 1.6 million businesses so far, they said friday.