Small business rescue program resumes: What you need to know
Secretary Mnuchin on expectations for restarting US economy, new relief for small businesses
Treasury Secretary Steven Mnuchin, member of the president’s coronavirus task force, joins Chris Wallace on ‘Fox News Sunday.’
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The race is on once again for small business owners devastated by the coronavirus pandemic to access billions of dollars in government-backed aid.
President Trump on Friday signed a $484 billion economic-relief bill, injecting a much-needed $310 billion into the Paycheck Protection Program, which provides forgivable loans to businesses with fewer than 500 workers to incentivize them to maintain their payroll throughout the virus outbreak.
The loan program, which relaunched Monday morning, exhausted its initial $349 billion in funding within 13 days and was heavily criticized for granting multimillion-dollar loans to big, publicly traded companies — even as small businesses languished financially.
In their haste to issue aid to small businesses, Congress did not exclude publicly traded companies or limit market value in the economic-relief plan that passed last month. Regardless of how much cash a company had in the bank, if the business could show any loss as a result of the virus outbreak, it qualified for a small-business loan through the PPP.
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But the second wave of funding will likely differ slightly: Last week, the Small Business Administration tightened the rules of which businesses qualified for the low-interest loans and pressured public companies that tapped the fund to return the money. Companies applying for the relief must now certify that the loans are necessary and prove they can't turn to another source for help.
"Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business," the agency said.
The agency told businesses to take into account their “current business activity and their ability to access other sources of liquidity” to support their operations before turning to the PPP. If borrowers accessed the aid before the Treasury issued the new guidance and repay the entire loan before May 7, 2020, it “will be deemed by the SBA to have made the required certification in good faith.”
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The SBA also said that hedge funds and private equity firms are ineligible for the loans.
In another set of rules issued Sunday, the SBA said that no company in bankruptcy can receive a loan through the PPP.
The second batch of money can be accessed by farmers, ranchers and agricultural producers, the agency said. Individuals previously convicted of a crime may also apply for the aid.
As in the first round, the lender must make the payment to the company within 10 days of loan approval.
When Congress created the $349 billion Paycheck Protection Program in the stimulus plan approved last month, it targeted companies with fewer than 500 employees. But restaurants and hotels were granted some flexibility in the legislation — so long as they employed no more than 500 workers at any single location, they could apply for the aid.
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That opened the program to a slew of big firms that could have received help via different avenues, like the Federal Reserve.
The result has been a growing backlash over the program, which granted multimillion-dollar loans to major restaurant chains like Potbelly, Ruth’s Chris Steak House and Shake Shack (which have since announced they canceled their loans).
At least 75 publicly traded companies — some with market values of well over $100 million — tapped the government-backed loans, receiving a combined $300 million in low-interest loans, according to a recent Associated Press analysis.
The loans were among the 4,412 approved by banks and the Small Business Administration worth $5 million or more, according to SBA data. The total amount of loans approved for at least $5 million totaled $30.9 billion — or about 9 percent of all those approved. The size of the typical loan nationally was $206,000, according to the data.
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