Small business loans above $2 million will get full audit to make sure they’re valid, Mnuchin says

Treasury Secretary Steven Mnuchin speaks during the daily briefing on the novel coronavirus, COVID-19, in the Brady Briefing Room at the White House on April 2, 2020, in Washington, DC.

Mandel Ngan | AFP | Getty Images

Treasury Secretary Steven Mnuchin told CNBC on Tuesday the government will audit any company taking out more than $2 million from the small business loan program. 

The government program allows companies to have their loans forgiven, provided they spend the funds on payroll, benefits, rent and utilities. The Paycheck Protection Program faced backlash after several public companies disclosed they had taken out the loans, which were intended to help small businesses with fewer than 500 employees weather the coronavirus crisis.

“I’m going to be putting out an announcement later this morning that for any loan over $2 million, the Small Business Administration will be doing a full review of that loan before there is loan forgiveness,” Mnuchin said on “Squawk Box.”

“This was a program designed for small businesses. It was not a program that was designed for public companies that had liquidity.'”

More than 220 public companies applied for at least $870 million from the government program, according to Washington-based data analytics firm FactSquared. Those companies included Auto Nation,  Ruth’s Hospitality Group and the Los Angeles Lakers.

Ruth’s Hospitality Group, which owns Ruth’s Chris Steak House, took a $20 million PPP loan. AutoNation took a $77 million loan. Both companies have said they would return the money. 

“I think that’s outrageous,” he said of the loan to the Lakers, which announced Monday it has repaid it.

“We don’t think they ever should have been allowed to,” Mnuchin said. “We put out an FAQ clarifying the certification.” 

According to guidance posted by the Small Business Association on April 23, borrowers must “certify in good faith” their loan request is “necessary.”

“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 states. 

Mnuchin said Tuesday he did not fault the banks that stewarded those loans, but, instead, the companies that applied for them that did not need. The program quickly ran out of initial $349 billion allotments as established by the $2.2 trillion CARES Act, before injecting another $310 billion into the program in a bill passed last week. Trump signed the bill, which also included funds for hospitals and testing, into law on Friday.

Both rounds of funding have been hampered by glitches, as too many banks trying to jam loans into SBA loan portal.

Oversight of the more than $2 trillion CARES Act has been a key issue for lawmakers, amid concerns the funds would go to companies that do not need it. Sen. Elizabeth Warren, D-Mass, wrote a letter to the Office of the Inspector General for the U.S. Small Business Administration last week urging a “broad investigation into the program’s implementation.”

The administration has pushed back against several of the oversight functions that Democrats have pushed for. President Donald Trump earlier this month removed the lead watchdog overseeing the $2 trillion coronavirus package, just days after the official, Glenn Fine, was appointed to the role.

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