(Bloomberg) -- The U.S. Treasury Department released new guidance Thursday for the next round of funding for a government coronavirus relief program for small businesses that emphasizes companies must certify the request is necessary to limit large firms that have other options for coronavirus relief from applying.
Treasury Secretary Steven Mnuchin has said the fund is intended for small businesses, and the guidance emphasizes that companies assess their economic need for a loan under the Paycheck Protection Program, or PPP, and “certify in good faith that their PPP loan request is necessary.”
The new guidance was issued after small businesses complained that large, publicly traded companies with revenue of more than $100 million and big chains such as Shake Shack Inc. and Ruth’s Chris steak houses were getting loans while they were getting shut out in the initial $349 billion in funding for loans. The U.S. House is expected to vote today on a relief bill for the program that includes an additional $320 billion, allowing for $10 billion in bank fees.
Borrowers must carefully review the required certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant” and make that certification in good faith, taking into account their current business activity and ability to access other sources of funding, the guidance says.
“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, referring to the U.S. Small Business Administration, which administers the program.
Lenders may rely on a borrower’s certification, and borrowers that previously applied for a PPP loan and repay the loan in full by May 7 “will be deemed by SBA to have made the required certification in good faith,” according to the guidance.
Restaurant chains Shake Shack and Sweetgreen Inc. returned their PPP loans. Mnuchin has encouraged other companies that “may have not been clear in understanding the certification” to do the same, and he’s also said companies that took funding and didn’t really need it could be “subject to investigation.”
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 sixth paragraph.)
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