Small Business Program Reviewed for Large Business Loans Taiwan News
NEW YORK (AP) – Congress has set aside $ 659 billion to throw a lifeline for small businesses and organizations affected by the coronavirus pandemic and to help paychecks continue to flow to workers who might otherwise go to the unemployment line.
Yet, that’s not exactly how it worked. Among the 650,000 companies on the partial list of recipients released by the Treasury Department on Monday were fashion designers such as Oscar de la Renta, clothing retailer Candie’s, and companies that own hundreds of fast food restaurants, including PF Chang’s and TGI Friday’s.
While many companies belong to industries hit hard by state and local government shutdown orders, they also have deep pockets or the backing of private equity firms. All of them have obtained multi-million dollar loans.
Loans have also been made to private equity firms, venture capital firms, law firms and other firms that may have felt an initial squeeze from the economic downturn, but appear to better positioned to weather the storm than small businesses, including some that did not get loans due. program design issues.
“Although the intention of the program is to be applauded, the implementation of the program was full of inconsistencies and one could have predicted this outcome,” said Katie Vlietstra, vice-president of the National Association of Self-Employed Workers.
The PPP has offered loans of up to $ 10 million to businesses with fewer than 500 employees. The most attractive aspect of the program: possible cancellation of the loan if most of the money was spent on workers. Otherwise, the loan had to be repaid, with an interest rate of 1%.
Large companies did not break the law when they applied for loans. The law that created the program did not put a cap on the amount of income a potential borrower could have, and a business could get a loan even if it had access to credit elsewhere.
This is why, according to some experts, large companies with dedicated accountants and lawyers would have been foolish not to take advantage of the program. Even if they ended up paying off the loans with 1% interest.
“It was a cash gift. Who wouldn’t ask for it? Said Bob Phibbs, a retail industry analyst.
Boddie-Noell Enterprises, owner of 346 Hardee restaurants, received between $ 5 million and $ 10 million, the government said. The Rocky Mount, North Carolina-based company has more than 10,000 employees.
“We asked for the PPP because it was created specifically for payroll and potentially offered much more favorable terms than a traditional bank loan,” Boddie-Noell spokesperson Rick Rountree said.
But when the loans were first offered, lawmakers described them as a bailout for small businesses and their employees. Outrage followed when big players secured money in the program’s first round of funding, while many small businesses remained on hold as the initial $ 349 billion ran out.
In April, shortly after loan money started pouring in, it became known that large, well-funded companies, including two publicly traded restaurant chains, Ruth’s Chris Steak House and Shake Shack, and the Los Angeles Lakers of the NBA had obtained loans. Many companies returned the money under pressure from the public and the Treasury Department; the government said $ 30 billion in return funds included money returned by these companies.
Treasury Secretary Steven Mnuchin was quick to say the government would verify loans over $ 2 million, although some experts were in doubt.
“The SBA will have its work cut out for reviewing loans to ensure these recipients are in full compliance,” said Karen Kerrigan, chair of the Small Business & Entrepreneurship Council advocacy group.
The government did not release exact loan amounts on Monday, but listed companies in a range. PF Chang’s China Bistro said its loan of between $ 5 million and $ 10 million had kept 12,000 employees as its more than 210 restaurants transitioned to take-out. The Scottsdale, Arizona-based company said it was using the money for employee salaries and benefits.
PF Chang’s is owned by private equity firm TriArtisan Capital Advisors. The same company owns TGI Friday’s, which owns or franchises more than 500 restaurants across the country and has secured a loan of between $ 5 million and $ 10 million. TGI Friday’s said the forced shutdowns left it no more than 20% of its income and the loans allowed it to rehire staff on leave.
Muy Brands, a San Antonio, Texas-based owner of more than 750 Wendy’s, Taco Bell and Pizza Hut franchises, has received between $ 15 million and $ 30 million between three entities. CEO James Bodenstedt is also a major donor to President Donald Trump, according to federal campaign finance records. Neither company responded to requests for comment.
The Small Business Administration issued a warning next to the data that noted that companies on the list may ultimately not be considered eligible for a loan forgiveness. Additionally, according to the agency, some of the companies on the list may have been approved for loans but did not actually receive the money.
Congress increased the program to $ 659 billion at the end of April. There is still about $ 130 billion left. Congress extended the program until August 8.
“It would have been a much bigger problem if they had run out of money, because suddenly the little tailor who asked for $ 2,000 and couldn’t get it because he was taken by listed companies in scholarship, ”said Phibbs.
The list also included well-known fashion and retail names whose revenues plunged amid store closings across the country. Among them: Iconix Brand Group, a publicly traded company that owns the Candie’s, Joe Boxer and Ed Hardy brands, which received between $ 1 million and $ 2 million. He did not respond to a reporter’s request for comment.
Untuckit, which has 85 shirt stores, received a loan of between $ 5 million and $ 10 million; the company said it was using the money to continue paying its workers. High-end designers Oscar de la Renta, Carolina Herrera and Vera Wang, who collectively employ 300 workers, have each secured loans in the range of $ 2-5 million. None of the companies responded to a request for comment.
Private equity firms that buy and sell companies priced in the millions of dollars were also on the Treasury’s list. Aliera Companies, a private equity firm specializing in healthcare, has secured a loan of $ 5 million to $ 10 million. Aliera said the loan would help “pay our more than 250 employees in these difficult and uncertain times.”
AP Business Writers Dee-Ann Durbin in Detroit and Ken Sweet in New York contributed to this report.