Owners and executives of large companies who knowingly abused the Coronavirus Paycheck Protection Program to receive loans, which drained the program of funds, are in serious trouble.
New guidelines released by the Small Business Administration (SBA) Thursday dictate that public companies with sufficient liquidity to support normal business operations throughout the coronavirus pandemic will not be eligible for the Paycheck Protection Program (PPP).
Senior SBA officials pointed Daily Caller to a new addition to the program stating that “borrowers still must certify in good faith that their PPP loan request is necessary” while applying for a PPP loan.
“Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business,” the guidance reads. “For example, 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 PPP rule itself states that “knowingly” violating the application guidelines can result in prison sentences up to 30 years and fines up to $1,000,000. It would appear that all other requirements for receiving a loan, including having fewer than 500 employees on staff and dedicating 75 percent of the relief toward payroll concerns, have not been changed.
Several large companies, including Shake Shack, Sweetgreen, and Ruth’s Chris Steak House, all obtained PPP loans under the first batch of funding, while countless significantly smaller companies’ applications were denied by their banks.
“The intent of this money was not for big public companies,” Treasury Secretary Steve Mnuchin told reporters gathered at the White House on Tuesday. “We’re going to put up very clear guidance so that people understand what the certification is, what it means if you’re a big company.”
He further hinted that companies could be investigated if suspected of violating the good faith pledge necessary for a PPP loan. President Donald Trump himself stated that it would be “appropriate” for companies to return their loans if capable of withstanding the financial uncertainty brought by the pandemic.
Thursday’s new guidance sets a May 7 deadline for large companies to return any PPP relief they might have received in full or risk legal penalties.