Some large, publicly traded companies have been approved for emergency loans while smaller businesses struggled to get relief.
WASHINGTON (CN) — The newly created House Select Subcommittee on the Coronavirus Crisis sent letters Friday demanding five large companies return money they received from a federal loan program meant to help small businesses stay afloat amid the coronavirus pandemic.
“Since your company is a public entity with a substantial investor base and access to capital markets, we ask that you return these funds immediately,” Chairman James Clyburn, D-S.C., wrote in the letters. “Returning these funds will allow truly small businesses — which do not have access to alternative sources of capital — to obtain the emergency loans they need to avoid layoffs, stay in business and weather the economic disruption caused by the coronavirus crisis.”
Congress created the small business loan initiative, known as the Paycheck Protection Program, as part of the sweeping economic relief package signed into law at the end of March known as the CARES Act. The program allows for loans for small businesses that can be forgiven if companies use the money to cover payroll, rent and certain other expenses.
Originally receiving roughly $350 billion in funding, the program ran out of money within two weeks of opening, prompting an additional round of funding from Congress. As of Sunday, the program has approved more than 3.8 million loans worth a combined $500 billion, according to the Small Business Administration.
Though the program has earned bipartisan praise, there has been widespread condemnation over news that some larger, publicly traded companies were approved for loans while smaller businesses struggled to access funding.
The letters signed by Clyburn and the other Democrats on the subcommittee are directed to five such companies. The subcommittee said it sent the requests to public companies that applied for loans of $10 million or more while having more than $25 million market capitalization and 600 employees.
Clyburn gave the companies until May 11 to say whether they plan to return the money. If any company declines to return the funds, the South Carolina Democrat asked they hand over documents showing communications they had with the Small Business Administration and any bank about the loan they received.
One of the companies that received a letter, the Georgia-based biomedical company MiMedx Group, said in a statement Friday that it will repay the loan in full. In a statement, the company said the loan allowed it to keep a full payroll despite “widespread uncertainty.”
“As previously announced, the company has experienced softened sales due to restricted access, both for patients and our field personnel, and the cancellation of elective surgeries,” the company said in a statement. “The company implemented numerous cost containment measures, including a temporary gradated reduction in compensation for all salaried employees in order to avoid layoffs.
The action is the first the Select Subcommittee on the Coronavirus Crisis has taken since the House voted to create it on April 23.
In addition to MiMedx, the companies that received letters are: EVO Transportation & Energy Services, Gulf Island Fabrication, MiMedx Group, Quantum Corporation and Universal Stainless & Alloy Products.
Gulf Island, which builds offshore energy facilities, received $10 million under the Paycheck Protection Program, according to a press release earlier this week. At the time, the company said the money from the loan helped it bring back some employees it had furloughed and to keep on some it would have otherwise had to lay off.
The Pennsylvania-based Universal Stainless & Alloy Products said in a statement announcing first quarter earnings that it too received $10 million under the loan program, which “enhanced the company’s financial flexibility and further strengthened its liquidity position.”
In early April, the California-based technology company Quantum said it had reworked conditions on existing loan agreements due to the pandemic.
None of the companies other than MiMedx immediately returned requests for comment on the committee’s document request.