The $ 349 billion paycheck protection program ran out of funds last week, blocking small businesses that were unable to access the emergency loan program run by the government’s Small Business Administration federal.
Shake Shack, the popular hamburger chain founded by celebrity chef Daniel Meyer, said it would return the $ 10 million it received from the payment protection program after the company was heavily criticized for asking emergency funding for small businesses.
“The money will go back to the fund. However, new loans cannot be made out of these funds until Congress authorizes new funds, ”said Jennifer Kelly, spokesperson for the Small Business Administration.
The Paycheck Protection Program offered two-year loans of up to $ 10 million at a 1% interest rate, with the principal repayable if the funds are largely used for payroll, mortgage interest, rent and utilities. The loans were means for small businesses with less than 500 employees.
But the paycheck protection program allowed catering companies like Shake Shack that did not employ more than 500 people in one place to get loans. Shake Shack received a $ 10 million loan under the program via JPMorgan Chase
The loan from the Shake Shack Payment Protection Program has been met with skepticism by some due to the large size of the company, whose shares are listed on the New York Stock Exchange. Shake Shack, which has a market valuation of $ 1.7 billion, was able to raise $ 150 million in a stock offering on Friday.
Shake Shack said on Friday that prior to the stock offering, it had $ 112 million in cash. The company had 7,603 employees at the end of 2019, but had recently laid off or laid off some 1,000 employees.
“The ‘PPP’ did not have a user manual and it was extremely confusing,” wrote Meyer and Randy Garutti, CEO of Shake Shack, in a LinkedIn post on Monday. “We now know that the first phase of the PPP was underfunded and that many of those who need it most received no help. ”
“Shake Shack was fortunate last Friday to be able to access the additional capital we needed to ensure our long-term stability through a public market equity trade. We are grateful for this and have decided to immediately return the full $ 10 million PPP loan we received from the SBA last week so that restaurants that need it most can get it now.
But the SBA won’t be able to channel the $ 10 million of loan proceeds Shake Shack returned to other small businesses unless Congress allows the SBA to do so. The Trump administration has worked with Congress to try to provide a new round of funding and replenish the program to provide emergency and potentially repayable loans to American small businesses.
Disclosure: Forbes Media LLC confirmed on July 6, 2020 that it received a Paycheck Protection Program loan of $ 5-10 million on April 15.