Bloomberg Tax
April 23, 2020, 10:33 PM

U.S. Toughens Guidance on Who Can Get Small-Business Funds (1)

Mark Niquette
Mark Niquette
Bloomberg News

Companies seeking aid from the next round of small business relief will be required to attest to their need for the loan and could be asked to prove it, as the Trump administration seeks to prevent mom-and-pop operations from being crowded out.

Treasury Secretary Steven Mnuchin has said the fund is intended for small businesses, and large companies that have already taken loan funding are being given until May 7 to return it without penalty amid an uproar over Shake Shack Inc. and the operator of Ruth’s Chris steak houses and other firms getting relief aid.

New guidance released Thursday by the Treasury Department and the U.S. Small Business Administration emphasizes that companies must “certify in good faith” the economic need for financing under the Paycheck Protection Program, or PPP.

The guidance was issued after small businesses complained that large, publicly traded companies and big chains were getting loans while they were shut out in the initial $349 billion in funding for loans. That money ran out in just 13 days, and the U.S. House approved a relief bill Thursday that includes an additional $320 billion for PPP, allowing for $10 billion in bank fees and processing costs.

“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,” the guidance says.

Lenders may rely on a borrower’s certification, and borrowers that previously applied for a PPP loan and repay it in full by May 7 “will be deemed by SBA to have made the required certification in good faith,” according to the guidance.

Chains including Shake Shack and Sweetgreen Inc. and Ruth’s Hospitality Group Inc. have said they’re returning their loans.

Mnuchin said he’s giving other companies the benefit of the doubt that they didn’t understand the conditions of the program.

“If you pay back the loan right away, you won’t have liability to the SBA and to Treasury,” Mnuchin said at the White House briefing on Tuesday. “But there are severe consequences for people who don’t attest properly to this certification.”

Republican Senator Marco Rubio of Florida tweeted on Monday that “any company that doesn’t need a PPP loan but got one made a false representation.” He also announced that the Senate Committee on Small Business and Entrepreneurship that he leads will conduct “aggressive oversight” of the program this fall, including subpoena power to determine whether companies made false certifications to obtain loans.

The PPP offers loans of as much as $10 million that convert to grants if proceeds are used to keep workers on the payroll and cover rent and other approved expenses for about two months, a stopgap designed to help businesses get by until the economy reopens.

Dallas hotel executive Monty Bennett, who is also a major donor to President Donald Trump has emerged as the biggest winner from the coronavirus bailout for small businesses. A combined total of $59 million from the small business lending package went to three lodging companies chaired by Bennett, according to regulatory filings.

(Updates with additional details from first paragraph)

--With assistance from David McLaughlin.

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Mark Niquette in Columbus at

To contact the editor responsible for this story:
Sara Forden at

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