Now the government is hoping others will pay.
“A public enterprise with substantial market value and access to capital markets is unlikely to be able to make the required certification in good faith, and such an enterprise should be prepared to demonstrate to the Small Business Administration, upon request. , the basis of its certification ”, according to the Treasury guidelines published Thursday. “… Any borrower who applied for a PPP loan before the publication of this directive and who repays the loan in full by May 7, 2020, will be deemed by the SBA to have performed the required certification in good faith. ”
In other words, the Treasury wants its money back.
And later that day, Ruth’s Chris said it would oblige.
“We intended to repay this loan according to government guidelines, but as we learned more about the program’s funding limits and its unintended impact, we decided to expedite this repayment,” he said. Cheryl Henry, president and CEO of Ruth’s Hospitality, said in an emailed statement to CNN Business. “We remain committed to protecting our hard-working team. We hope these funds will be loaned to another company to protect their employees, as we planned.”
They included restaurant chains, energy companies, CBD companies, and real estate investment trusts.
The original SBA guidelines were not specific enough to target small businesses, allowing large companies to legally go out and claim the cash loans, said economist Richard Prisinzano, director of policy analysis at Penn Wharton Budget Model, a budget policy research initiative at the University of Pennsylvania School of Business.
“First, I think it’s a problem of definition,” said Prisinzano. “Second, I don’t think the bill was really aimed at the little guys.”
People hear “small business” and think of the Main Street mom-and-pop store; But by US small business administration standards and PPP terms, the vast majority of US businesses are now considered small businesses, he said.
“Funds from any canceled loans will be returned to the PPP program,” said Shannon Giles, an SBA spokesperson in an emailed statement to CNN Business. In the event that a loan is canceled after the P3 funds expired last Thursday, those funds cannot be used until Congress re-authorizes additional funds for the program so as not to violate anti-law. impairment. ”
Some of the state-owned companies that received the loans told CNN Business their circumstances warranted federal assistance.
“Even though we are a public company, we are not a big company,” said Joseph Dowling, CEO of CV Sciences, a San Diego-based company specializing in pharmaceuticals and consumer products derived from hemp and of CBD. “We understood that the guidelines were intended for small businesses like us.”
He added: “Not all state-owned enterprises have the same access to capital.”
“We’re like everyone else, we’re affected by this,” Dowling said. “We are a bit of a reliance on physical retailers who depend on customers.”
In response to an interview request and questions from CNN Business on Wednesday, a spokesperson for Ashford said only that the company had “very few” avenues of access to capital.
“The PPP program was specifically designed for businesses with less than 500 employees per location that are in NAICS code 72, such as hotel and restaurant chains, as many, like Ashford, are not eligible for the Main program. Street Lending, ”Jordan Jennings, wrote an Ashford spokesperson.
But by choosing to apply for these loans, the biggest publicly traded companies are walking between what is legal and what is ethical, said Chris Allieri, founder and director of branding and public relations company Mulberry & Astor.
“If you’re not a small business, you better not touch this thing; it’s going to be toxic if you do,” he said. “If you’re part of that mix, you’re basically seen as a clash with small business, and it’s as anti-American as it gets.”
Some SOEs have argued that they do not accept PPP loans.
“The SBA provisions of the CARES Act seem to us designed to help small businesses and their employees,” said Laurie Schalow, Chipotle’s corporate reputation manager, in an email response to a query from CNN Business. “Our business is different and we have managed it in such a way that we can financially support our employees even with the uncertainties of today and hope to be able to do so in the future as well.”
Brands in contact with customers, such as restaurant chains like Ruth’s Chris and Shake Shack, are likely to bear the brunt of consumer backlash, Allieri said, adding that their reputation could be tarnished once orders continue. place of Covid-19 will be lifted.
“I think we’re going to see this ‘buy local’ and this real commitment to independent restaurants like we’ve never seen before,” he said. “I think it will push even further.”
Correction: This article has been updated to state that the Treasury Guidelines for the Payment Protection Program were released on Thursday.