KEY POINTS

  • The U.S. Treasury Department and Small Business Administration blocked big banks from applying to the Paycheck Protection Program for eight hours
  • Banks with less than $1 billion in assets were allowed first acces to the program's second wave of coronavirus relief funding
  • The Treasury and SBA's decision followed backlash over large companies getting millions of dollars from the program meant to aid small businesses during the coronavirus pandemic

The U.S. Treasury Department and the Small Business Administration temporarily shut out big banks from submitting applications into the government’s paycheck protection program. Full operations were restored Thursday.

U.S. Small Business Administration Administrator Jovita Carranza and U.S. Treasury Secretary Steven T. Mnuchin said in a statement the action was meant to ease SBA processing glitches.

“In addition to ensuring access for the smallest lenders, we expect that providing this reserved processing time today will enhance the SBA’s loan system performance for all users who submit loans outside of this time frame,” the statement said.

Both agencies said in an email to CNBC that it was done “to ensure access to the PPP loan program for the smallest lenders.”

“SBA and Treasury will evaluate whether to create a similar reserved time again in the future.”

It was the latest effort to address problems that have plagued the paycheck protection program during the coronavirus pandemic. The program is on its second round of funding after Congress approved an additional $310 billion after the original $349 billion was depleted in days.

One of the biggest reasons for the moratorium was that large companies took millions of dollars from the program while small businesses were shut out. This led to an immediate backlash as the public and government officials demanded many of these large companies return the money meant to help small businesses cover payrolls, rent and utilities.

The Los Angeles Lakers were one such business that applied and received money from the program during the first wave of funding. The NBA franchise, reportedly valued at more than $4 billion, received around $4.6 million from the PPP. It drew almost immediate backlash from Mnuchin and the public before the Lakers said the money would be returned.

Other companies that have agreed to return their loans are:

  • Shake Shack Inc. – $10 million
  • Hallmark Financial Services – $8,311,000
  • Auto Nation, Inc. – $77 million
  • Ballantyne Strong, Inc. – $3.1 million
  • Nathan’s Famous, Inc. – $1,224,645

Others have opted to keep the money and, in turn, used it to help expand further, including Ohio software company Intellinetics, which received over $800,000 from the PPP. About a week later, it spent around $300,000 to buy Imaging Systems Inc. of Michigan.

Companies that improperly took money meant to aid small businesses could be criminally liable, US Treasury Secretary Steven Mnuchin says
Companies that improperly took money meant to aid small businesses could be criminally liable, US Treasury Secretary Steven Mnuchin says AFP / MANDEL NGAN
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