Treasury warns large companies against applying for coronavirus loan program

The Trump administration on Thursday advised large businesses with ample access to financial markets against applying for emergency coronavirus relief loans as some major companies face backlash for tapping aid for small businesses.

In a set of guidelines released Thursday, the Treasury Department warned that valuable, publicly traded companies likely cannot say in good faith that they qualify for an emergency Small Business Administration (SBA) loan program to prevent layoffs and bankruptcies.

The SBA initiative, called the Paycheck Protection Program (PPP), has issued $349 billion in forgivable loans to small businesses meant to keep workers employed amid widespread shutdowns and social distancing orders. While the program was created to keep small businesses afloat, more than a dozen large companies were able to secure loans intended for firms with fewer credit options.

President Trump, Treasury Secretary Steven Mnuchin and lawmakers in both parties blasted large companies who sought PPP loans even if they legally qualified for the program. While the Treasury’s new guidelines are not necessarily legally binding, they warn of steep potential consequences for firms that stretch the boundaries of the PPP. 

The SBA program requires companies seeking loans to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

Treasury warned Thursday that “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 guidelines also gave large companies who have already received PPP loans a way to give back the emergency funds without further federal scrutiny.

“Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith,” the guidelines read.

A $310 billion increase in PPP funding set to pass the House and land on Trump’s desk Thursday also sets aside $60 billion to be lent by smaller banks and lenders to help ensure the program reaches firms of all sizes.

And Sen. Marco Rubio (R-Fla.), chairman of the Senate Small Business Committee, said Monday that he is willing to subpoena companies as the panel prepares to conduct oversight of the PPP.

Updated at 4:51 p.m.