Three publicly traded hotel companies tied to a Texas businessman said on the weekend that they would not give back millions of dollars in loans from a government program aimed at helping small businesses, as the program restarts for another round on Monday.
Facing pressure from the government, several big companies, including the Potbelly and Shake Shack restaurant chains, have said they will return loans they received under the Paycheck Protection Program.
At least 13 public companies intend to give back $170 million US, according to a report Sunday in the Wall Street Journal. They include Auto Nation, a national car dealership chain, and Ruth’s Hospitality Group, owner of Ruth’s Chris Steakhouse.
But three hotel companies, Ashford Inc., Ashford Hospitality Trust and Braemar Hotels & Resorts — which are tied to Texas hotel magnate and Republican donor Monty Bennett — do not plan on returning the $69 million US they received They will use the money to protect jobs, they said in a statement on the weekend.
Since mid-March, the companies and their hotel properties have furloughed or laid off 90 per cent of their workforce. Their applications under the PPP requested $126 million.
“Media concerns over our receipt of PPP funds are misplaced. The PPP program was specifically designed to help companies like ours as part of the national objective of shoring up businesses and getting people back to work,” their statement said.
The PPP is intended to help small businesses with fewer than 500 employees. Its initial $349 billion in funds ran out last week, and the House gave final approval to $310 billion in additional funds Thursday.
Backlog of applications from 1st round
U.S. banks were girding for another chaotic dash to grab the fresh small business aid as the U.S. Small Business Administration (SBA) reopened the PPP on Monday morning, allowing lenders to resume processing applications from businesses hurt by the novel coronavirus shutdown.
With the nation’s lenders already sitting on hundreds of thousands of backlogged applications, the fresh funds are expected to be burnt through in days, leaving large numbers of mom-and-pop enterprises out in the cold again, banking groups said.
“Everyone pretty much has applications ready to go. It should be a week or so before the money is eaten through,” said Paul Merski, an executive vice-president at the Independent Community Bankers of America.
He added it would be “very challenging” for anyone who has not already applied for a loan to successfully do so this week.
We are returning the PPP loan after further clarification from the Treasury Department. We will continue to seek alternatives to help support our employees and enable them to return to work so they can serve our loyal customers.
Created as part of a $2.3 trillion congressional economic relief package, the program kicked off on April 3 with an initial $349 billion in funding which was quickly exhausted in less than two weeks. The program allows small businesses hurt by the coronavirus to apply for government-guaranteed loans with participating banks. Those loans will be forgiven if they are used to cover payroll costs, subject to some conditions.
Amid the rush to get funds out the door, the first round of the program was hobbled by technology and paperwork issues. It has also come under scrutiny after banks channelled some of the money to their larger, more profitable clients, including hedge funds and public companies.
“I am troubled by reports of publicly traded companies with access to capital and bank relationships receiving money quickly while many Ma and Pa shops can’t even get a call back or $1,” Republican Sen. Martha McSally of Arizona tweeted last week. “The next round of funds must be focused on small businesses, with better oversight and transparency.
Treasury asks the ineligible to return funds
The SBA issued an advisory on April 23 clearly aimed at larger companies that took money, with new guidelines implying that unless a company can prove it was truly eligible for a loan, the money should be returned by May 7. The Treasury Department made few provisions to identify applicants that should have been ineligible, so companies were requested in the advisory to come forward if they’d received PPP help.
The SBA and the U.S. Treasury on Sunday also imposed a $60 billion cap on the amount of funds a lender can process under the scheme, although few if any banks are likely to hit that high ceiling.
“The banks have been less than helpful in all this,” said Brian Rindos of Maryland after care provider Kids Adventures, who tried more than nine lenders after several turned him away or ignored him altogether. On Friday, he said he received tentative approval.
“Let’s say I’m cautiously optimistic … this time.”
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An Associated Press investigation showed that dozens of publicly listed companies collectively received hundreds of millions of dollars of loans from the program.They included companies with thousands of employees, firms with past penalties from government investigations and corporations at risk of financial failure even before the coronavirus walloped the economy..
At least 94 companies that disclosed receiving aid since the program opened April 3 were publicly traded, the AP found, some with market values well over $100 million. And about 25 per cent of the companies had warned investors months ago — while the economy was humming along — that their ability to remain viable was in question.
The AP identified the 94 companies, or their subsidiaries, as recipients of a combined $365 million in low-interest, taxpayer-backed loans.
The firms getting maximum loans are likely just a tip of the iceberg: Statistics released last week by the SBA showed that 4,400 of the approved loans exceeded $5 million. Overall, the size of the typical loan nationally was $206,000, according to the statistics.
The SBA will forgive the loans if companies meet certain benchmarks, such as keeping employees on payroll for eight weeks.