The Small Business Administration (SBA) has issued new rules it says will make it unlikely that publicly traded companies will receive money from the next round of coronavirus rescue funding.
In an 11-page memo released on Thursday (April 23), the SBA posted answers to 31 frequently asked questions raised by companies seeking assistance from the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act).
On whether big companies will qualify, the SBA said, “Borrowers still must certify in good faith that their PPP loan request is necessary. 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.”
Still, the SBA does not exclude companies with more than 500 employees from accessing the fund.
“Small business concerns can be eligible borrowers even if they have more than 500 employees, as long as they satisfy the existing statutory and regulatory definition of a ‘small business concern’ under section 3 of the Small Business Act ...” the SBA wrote.
Reports on Wednesday noted the agency is preparing for a second round of PPP funding after its initial $310 billion was exhausted. By a voice vote, the Senate approved another $484 billion in an interim relief fund, $310 billion of which is reserved for the depleted PPP fund. The House is expected to act on Thursday (April 23). President Donald Trump has said he will sign the measure by Friday.
The SBA update follows criticism from small and medium-sized businesses (SMBs) who say they were shut out of the program while other bigger companies jumped to the head of the line, CNBC reported.
In response, hamburger chain Shake Shack pledged to return $10 million in PPP money following the sale of $150 million in new shares. Also, Trevor Milton, CEO and founder of Nikola Motor Co., was forced to defend his company’s $4.1 million forgivable loan. The company is valued at more than $3 billion.
There was good news for ex-convicts who now own a business.
“Question: I need to request a loan to support my small business operations in light of current economic uncertainty. However, I pleaded guilty to a felony crime a very long time ago. Am I still eligible for the PPP?
“Answer: Yes. Businesses are only ineligible if an owner of 20 percent or more of the equity of the applicant is presently incarcerated, on probation, [or] on parole ...”