Ruth’s Hospitality Group decided Thursday to return $20 million in Paycheck Protection Program loans because of new guidelines released by the Small Business Administration and U.S. Department of Treasury.
Many have criticized Ruth’s and other large companies for accepting loans while other small businesses have struggled through the process. More than 250,000 people signed a petition demanding that Ruth’s give back its loans.
The program is for businesses with 500 or fewer employees, but companies have walked around that rule because of a provision that says the employee count is based on individual locations, not overall.
Shake Shack, Kura Sushi USA, and Sweetgreen have also returned their funds. In total, that’s $46 million going back into the program.
“We intended to repay this loan in adherence with government guidelines, but as we learned more about the funding limitations of the program and the unintended impact, we have decided to accelerate that repayment,” said Ruth’s CEO Cheryl Henry in a statement. “It is our hope that these funds are loaned to another company to protect their employees.”
The SBA and Treasury released an FAQ Thursday to provide more clarity on what type of business qualifies for a PPP loan.
One question asked, “Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?”
The answer said: “Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, 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.”
The Trump administration voiced its displeasure earlier in the week in response to large companies taking funds. Treasury Secretary Steve Mnuchin said there would be “severe consequences” for major companies if they don’t return their loans.
“If you pay back the loan right away, you won’t have liability to the SBA and to Treasury,” Mnunchin said during a press conference Tuesday. “But 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. We appreciate what’s going on, and they’re hiring people back.”
The FAQ said that any business that applied for a loan before the release of the guidance and repays the loan by May 7 will be “deemed by SBA to have made the required certification in good faith.”
Congress passed new legislation this week that would add $310 billion to the program. In another effort to prevent big companies from getting funds, $60 billion would be sent to small and mid-sized lenders that serve “unbanked” businesses in rural and underserved communities.