Coronavirus Economy: SBA Paycheck Program Awarded $1 Billion To Publicly Traded Companies

Updated: 10:40 a.m., May 2

In a statement emailed to IBTimes, Wave Life Sciences said it was repaying the SBA loan as a result of the new guidelines issued by the administration.

Original story

Nearly 300 public companies reportedly received $1 billion in Small Business Administration loans meant to shore up small businesses amid the coronavirus pandemic. Some of the loans were for many times the $10 million limit.

The analysis by the Washington Post indicated 43 of the companies had more than 500 workers – the limit specified for the paycheck protection program – and several paid their executives $2 million or more.

The paycheck program opened with $349 billion, which was depleted in less than two weeks as 80% of applicants complained they had been shut out because banks were favoring larger clients with whom they had ongoing relationships even though the loans were supposed to be awarded on a first-come, first-served basis. Some $250 billion was added last week, and $60 billion more was set aside to enable community banks and credit unions to participate. The application process began anew Monday, with the SBA locking out major banks for an eight-hour period Wednesday night.

Several organizations, including the Los Angeles Lakers, which is privately held and worth $4.6 billion, and restaurant chain Shake Shack (SHAK), have said they would return the funds. The Post said the refunds as of Thursday amounted to just $125 million. Others said they were use the money in line with the program’s guidelines: to pay their workers so the loans could be forgiven.

Treasury Secretary Steven Mnuchin said 75% of the loans were for $150,000 or less. After the fund was replenished, Treasury issued new guidelines discouraging large companies from applying, and urging public companies to return the money by May 7. He said loans of $2 million or more would be audited and potential penalties applied.

Research by the University of Chicago and the Massachusetts Institute of Technology indicates only a small fraction of truly small businesses were awarded loans in the first tranche, with the four top banks disbursing just 3% of paycheck loans to areas “most adversely affected by the economic effects of the pandemic.”

AutoNation (AN), which employs 26,000 people, received at least $77 million but said it would return the funds, the Post reported.

Ashford Hospitality Trust (AHT) of Dallas received more than $30 million in paycheck loans, even though the program’s maximum is supposed to be $10 million, the Post reported. Braemar Hotels and Resorts (BHR) of Dallas received nearly $15.8 million while J. Alexander’s Holdings Inc. (JAX) received $15.1 million and Ruth’s Hospitality Group (RUTH) was awarded $20 million. The Wall Street Journal reported Ruth’s, which operates Ruth’s Chris Steakhouse restaurants, said it would return the funds.

Among the loan recipients whose executives receive multimillion-dollar paychecks are Aquestive Therapeutics (AQST) of New Jersey, Wave Life Sciences (NGM) of Singapore and Veritone (VERI) of California. Aquesitive said it would return the money in a filing with the Securities and Exchange Commission.