Publicly traded companies have 2 weeks to give back loans intended for small businesses or potentially face 'severe consequences,' Treasury Department says
- The Treasury Department is asking publicly traded companies to return their loans from the federal government by May 7, according to new guidance issued on Thursday.
- Large companies who drew from the fund intended for small businesses were criticized after many small businesses were unable to access loans as the fund ran out of money.
- Some public companies, like Shake Shack, gave back the money after they realized small businesses weren't able to access the loans, but some companies like Potbelly have held on to the funds.
- Ruth's Chris Steak House, which had kept their loan even after criticism, said on Thursday it would return the funds, according to NBC News.
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The Treasury Department is asking publicly traded companies who received loans from a fund intended to help small business recover from the pandemic to return the money by May 7 or potentially face consequences, according to new guidance issued on Thursday.
The department said that it is "unlikely that a public company with substantial market value and access to capital markets" could prove that a federal loan was necessary for them to stay afloat.
The request from the Treasury Department comes after large companies who took loans from the fund were criticized heavily as the fund ran out of money — and small businesses, which the fund was intended to help, were unable to get a loan.
Large companies were able to access the funds through a loophole in the restrictions that were meant to save the loans for use only by small businesses.
Some companies like Shake Shack, which received a $10 million loan, said the process was confusing, and when they realized small businesses couldn't access the fund, they gave back their loan to free up more cash.
But, some businesses like Potbelly have held on to their loans. Ruth's Chris Steak House, which had kept the loan after Shake Shack and others returned the funds, said on Thursday that it would return the loan following the request from the Treasury Department, according to NBC News.
Companies who pay back the loan in full by May 7 will be deemed to have made the request for the loan "in good faith."
Treasury Secretary Steven Mnuchin said on Tuesday that "there are severe consequences for people who don't attest properly to this certification. And again, we want to make sure this money is available to small businesses that need it, people who have invested their entire life savings."
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