More Large Companies to Return PPP Loans

Potbelly, Sweetgreen and Ruth’s Chris Steak House have announced they will return loans they received from the Paycheck Protection Program.

Part of the CARES Act, the Paycheck Protection Program was designed to support small businesses affected by the COVID-19 outbreak, but the program ran out of money less than two weeks after it started accepting applications and was widely criticized for favoring larger companies. 

Typically, the Small Business Administration classifies business as “small” only if they employ fewer than 500 people, but a controversial provision of the CARES Act allowed any company to apply for the PPP’s small business loans so long as they employ fewer than 500 people per location.

On Friday, President Trump authorized a new round of funding for the program, along with new guidelines from the SBA designed to prevent large and publicly traded companies from receiving PPP loans. The SBA is also signaling to companies that already received loans that if they do not meet the eligibility requirements of the new guidelines, they should be prepared to return their loans.

“Borrowers still must certify in good faith that their PPP loan request is necessary,” the SBA wrote in an FAQ released Thursday. “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.”

Potbelly, a publicly traded chain with 474 locations across 32 U.S. states, received a $10 million loan from the PPP on the same day it revealed the company paid a $100,000 signing bonus to a new executive.

"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,” Potbelly wrote in a Tweet on Saturday.

Ruth’s Chris, which has more than 150 locations around the world, released a statement on Thursday saying it would return a $20 million loan it received from the program. The same day, fast-casual chain Sweetgreen committed to returning its $10 PPP loan.

“At the end of last week, we were approved for a $10M loan through the program. That same day, we learned that the money had run out and so many small businesses and friends in the industry who needed it most did not receive any funds. Knowing that, we quickly made the decision to return the loan,” Sweetgreen wrote in its announcement.

The cascade of publicly traded companies returning their PPP loans kicked off last week, when Shake Shake announced it would return its $10 million PPP loan.