More than 30% of the Paycheck Protection Program loan funds secured by public companies were returned by Thursday’s deadline to escape potential penalty.
Sixty-two public companies, including three from Long Island, had repaid more than $412 million by 5:30 p.m., according to the data provider FactSquared in Washington.
Banks and other private lenders have made $1.3 billion in PPP loans to 410 public companies. That equals about 0.2% of the $542 billion in PPP loans guaranteed by the federal government as of Wednesday, according to data from the U.S. Small Business Administration, which oversee the program.
Still, small business owners who haven’t secured funding are blasting banks and federal officials for allowing public companies to receive PPP loans when they could raise cash by selling stock. Public companies are eligible for the PPP under federal law.
After bipartisan criticism from Capitol Hill, SBA administrator Jovita Carranza and Treasury Secretary Steven Mnuchin on April 23 said the PPP isn’t meant for public companies. The pair set a May 7 deadline, which was extended to Thursday, for public companies to return the loans or face unspecified "severe consequences." They ruled out legal penalties on Wednesday.
Although the CARES Act, which established the PPP, “suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere … borrowers still must certify in good faith that their PPP loan request is necessary,” states an April 23 directive from Carranza and Mnuchin. “Such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”
However, on Wednesday, Carranza and Mnuchin said certifications of loans of less than $2 million will not be reviewed. They also said if problems arise with loans of $2 million or more, the borrowers won’t face legal penalty.
On Long Island, three public companies have returned PPP loans so far: hotdog purveyor Nathan’s Famous Inc. in Jericho, defense contractor Frequency Electronics Inc. in Uniondale and test maker Chembio Diagnostics Inc. in Hauppauge.
Gyrodyne LLC in St. James is the 13th local public company to win a PPP loan. The real estate company has secured $82,100 to pay its four employees for two months, according to a securities filing.
Together, the local public companies have received nearly $38 million to sustain more than 2,330 jobs, securities filings show.
Under the Paycheck Protection Program, banks and other private lenders make federally guaranteed loans of up to $10 million, generally to businesses with 500 or fewer employees. The entire amount is forgivable in some instances. Newsday has secured a $10 million PPP loan.