WASHINGTON – Treasury Secretary Steve Mnuchin Tuesday said federal loans exceeding $2 million would get a “full review” after large companies and pro sports teams such as the Los Angeles Lakers took advantage of a stimulus program meant for small businesses.
Mnuchin said it was “inappropriate” for corporations, such as restaurant chains Shake Shack and Ruth’s Chris, and sports franchises, like the NBA’s Lakers, to apply for and receive Paycheck Protection Program loans created to rescue the cratering economy caused by the coronavirus pandemic.
“I’m a big fan of the team but I’m not a big fan of the fact that they took a $4.6 million loan,” he said on CNBC of the Lakers, which Forbes has valued at $4.4 billion. “I think that’s outrageous and I’m glad they returned it or they would have had liability.”
Shake, Shack, Ruth’s Chris and the Lakes have returned the loans.
Restaurant refund: Shake Shack plans to send back $10 million coronavirus stimulus loan
The program offers loans of up to $10 million to eligible businesses. The loans are completely forgiven if at least 75% of the money is spent on keeping or rehiring employees. The rest must be spent on business-related expenses such as rent or utilities.
Under the new framework, any PPP loan above $2 million would be audited and reviewed before they are forgiven. Large businesses who already received a loan have until May 7 to return the money or they could face penalties.
Mnuchin called the program “an incredible success.” But his announcement comes as the program continues to face technical issues that have slowed the processing of loans as many small businesses warn they are days away from shuttering forever.
Thousands of small business owners who have waited weeks for federal loans to rescue them during the coronavirus crisis endured more delays Monday as an unprecedented flood of requests continues to overwhelm a system never meant to handle the millions of loan applications PPP has generated.
The combination of an overwhelmed federal computer system and a massive crush of loan submissions led to the delays in the program when it re-opened Monday, officials said.
“What a mess,” said Holly Wade, director of research for the National Federation of Independent Businesses, a national trade organization.
The PPP, managed by the Small Business Administration, began accepting loan applications April 3 but temporarily ran out of money for several days after it had exhausted the $349 billion Congress approved last month. It began accepting applications again Monday after lawmakers approved another $310 billion for the program last week.
In an effort to avoid the computer crash that plagued the initial opening of PPP earlier this month, SBA notified lenders that a new “pacing mechanism” would prevent them from flooding the E-Tran system, the online portal where loans requests are submitted.
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“The pacing mechanism prevents any one lender from submitting thousands of loans an hour into the E-Tran system,” SBA spokeswoman Shannon Giles told USA TODAY. “If a lender goes above the pacing limit they will get timed out.”
American Bankers Association President and CEO Rob Nichols tweeted that lenders are “deeply frustrated” with the delays.
“Until they are resolved, America’s banks will not be able to help more struggling small businesses,” he wrote.
It’s the latest hiccup for the program, the centerpiece of the federal effort to keep as may as 30 million small businesses afloat in the midst of the social distancing measures taken to combat the COVID-19 pandemic.
Technical glitches delayed the first wave of loans earlier this month and the program was heavily criticized for allowing large firms and publicly traded corporations to access large loans while scores of mom-and-pop businesses were shut out.
Compounding the situation Monday was unprecedented volume. The number of users accessing the system is double compared to any day during the initial round of PPP, according to the SBA.
Despite the delays, the agency reported it had processed more than 100,000 loans by some 4,000 lenders as of 3:30 p.m. Monday. The SBA had approved more than 1.6 million loans in the first round.
Gas prices are falling because commuters, vacationers and road trippers are doing none of those things due to the coronavirus.
Under the program, firms employing 500 or fewer workers are eligible for low-interest loans of up to $10 million to cover their costs while they’re shuttered.
The loan, covering eight weeks of operations, does not have to be paid back if at least 75% of the money is spent keeping or rehiring workers. Otherwise, it carries a 1% interest rate and must be paid back within two years.
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Florida Republican Sen. Marco Rubio, who chairs the Small Business & Entrepreneurship Committee, said he expects the delays to ease as the Small Business Administration addresses the large volumes of loan requests that slowed processing.
He said the SBA’s decision to lower the minimum number of PPP loan applications required for lenders to make a bulk data submission from 15,000 to 5,000 should help the computer system handle the flood of loan requests.
A critic of the large loans that some businesses were receiving, Rubio said he’s also encouraged from what he’s heard so far that smaller firms and independent contractors appear to be getting a large share of the money in this round.
Two hours into second round of program
In first batch of applications the average #ppploan size is less than 1/2 of what it was in first round
An encouraging sign that it’s reaching smaller companies & 1099 independent contractors pic.twitter.com/zGJbH7maVE
— Marco Rubio (@marcorubio) April 27, 2020
This article originally appeared on USA TODAY: Coronavirus: Treasury to review PPP loans after Lakers return money