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This Is What the SBA Is Doing to Make Sure Big Companies Don’t Get All the PPP Funds

News flash: The U.S. government’s small business relief program is for small businesses — not large publicly traded companies.

The Small Business Administration (SBA) today issued new guidelines surrounding loan assistance under the Paycheck Protection Program (PPP), which is part of the CARES Act —and it made clear that the emergency funds are not meant to go to companies with access to capital markets.

“Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere, borrowers still must certify in good faith that their PPP loan request is necessary,” the SBA guidelines read. “For example, 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.”

In late March, the federal government had allotted $349 billion in emergency loans for small businesses that have been hurt by the coronavirus pandemic as part of the $2.2 trillion CARES Act — but on April 16, the SBA announced that the PPP funds had been used up. According to the National Retail Federation, nearly 200,000 small retailers have taken part in the PPP, receiving an average loan of $155,000 each for a total of $29 billion.

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But there has been some public backlash this week, after a number of larger and more-sophisticated operations were able to receive approval relatively quickly because of their skill at navigating the system. For instance, several companies valued at over $100 million in the stock market — such as DMC Global, Wave Life Sciences and Fiesta Restaurant Group — were able to successfully apply for the SBA’s relief, according to Morgan Stanley. Notably, after getting backlash for receiving $10 million through the PPP, fast-foot chain Shake Shack announced on Monday that it would return its funds.

While the SBA’s initial funds are gone, more money is expected to be on the way soon. After weeks of back and forth between Democratic and Republican lawmakers, Congressional leaders from both parties and the White House reached a deal on April 21 regarding terms for the latest stimulus package, which reportedly will total $484 billion. The package — which has been approved by the Senate and is slated to be voted on in the House of Representatives today — is said to include at least $310 billion for the PPP. Notably, a fifth of the funds going toward PPP loans have reportedly been earmarked for smaller lending institutions, to benefit businesses that otherwise would have difficulty accessing loans. 

Matthew Shay, president and CEO of the NRF, emphasized the importance of retailers being able to access the PPP funds.

“There are many small retailers that won’t be in business by the time the economy reopens if these loans dry up,” he said in a statement today. “This funding will let them keep their workers on the payroll and help the economy avoid the ripple effects that will come if additional businesses cease to operate and more people lose their jobs. This is an important step on the path to recovery not just for these businesses but our nation as a whole.”

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