It was great news when the small business loans were being dispersed. What wasn’t good news was who it was going to. The initial $350 million designated to small businesses ran out in a week. A second round of loans will be $310 billion, but industry experts have predicted it will only last days.
What is a small business?
The second round of loans has issued new guidelines for who will qualify. A company applying for funds must certify the loans are necessary and they cannot tap other sources of money, such as capital markets and shares. SBA said that public companies applying for loans must review the criteria and apply in good faith. Good faith meaning it is a need and the company doesn’t have a substantial market value or access to capital markets.
They also defined small businesses as businesses with less than 500 people. The loans will be forgiven if they do not lay off workers or if they rehire ones that were by June 30. But businesses with more than 1 physical location and have no more than 500 employees “per physical location” are also eligible.
The big businesses that won
Shake Shack with 189 outlets and almost 8,000 employees received $10 million. Potbelly Sandwich with a chain of 400 restaurants also won $10 million. The parent company of Ruth’s Chris Steak House, who has over 5,000 employed, received $20 million since they applied as two separate subsidiaries. Other winners of loans: DMC Global, Wave Life Sciences, and Fiesta Restaurant Group. There was a backlash as the companies are worth more than $100 million in the stock market.
Since receiving the loan, Shake Shack agreed the loans were distributed unevenly. They will return their $10 million loan. Sweetgreen, a salad chain restaurant with more than 90 stores in eight states, said they would also return their $10 million loan. Kura Sushi, a 25 restaurant chain based in Irvine, California, is also refunding their $5.58 million loan they received.
Who verifies what a small business is?
The SBA is allowing banks to verify a company’s true need for loans. This is why small business owners are blaming banks and favoriting the bigger companies. But there have been other problems with small business loans. Banks have turned away people because of the large number of applicants. Other companies suffered because their bank didn’t know all the details of the program.
The New York Times has predicted that independent restaurants, who make up two-thirds of American dining, may not survive. Most have resorted to takeout and delivery, but it might not be enough. With this second round of loans, hopefully, this will be their chance to make a comeback.
Tell us what you think – should small businesses have been prioritized when funding was distributed or should other facts such as stock value and equity available been considered? Follow us on Facebook and join the conversation!
