Following the lead of other companies, Potbelly announced Saturday that it will return $10 million to the Paycheck Protection Program.
The company said it was paying back the loan after clarification from the U.S. Department of Treasury. On Thursday, the Treasury and Small Business Administration released an FAQ that essentially discouraged large companies like Potbelly from applying for PPP loans. Treasury Mnuchin said major companies that received loans would face “severe consequences,” but the FAQ said those can be avoided if funds are repaid by May 7.
“Potbelly’s sales dropped dramatically when COVID-19 hit, forcing us to furlough employees, close shops, and significantly cut salaries at all levels of the organization. In order to financially support our in-shop employees, and based on SBA guidelines, we applied and qualified for assistance under the Payroll Protection Program,” the chain said in a statement.
“We were surprised and disappointed when the fund was quickly exhausted, leaving many without help,” the company added. “We are returning the PPP loan after further clarification from the Treasury Department. We will continue to seek alternatives to help support our employees and enable them to return to work so they can serve our loyal customers.”
The program is for companies with 500 or fewer employees, but eligibility is based on workers at individual locations, not overall, allowing chains to receive loans.
“The company believed its subsidiary operating companies were eligible for the loans in accordance with the special eligibility provisions for larger companies under provisions included in the CARES Act and the applicable implementing guidance issued by the U.S. Small Business Administration under the PPP that was available at the time loan applications were submitted,” J. Alexander’s said in a statement. “The loans had been obtained to support the goal in the legislation of providing financial assistance to restaurant-level employees, including approximately 3,400 furloughed hourly employees that are not presently assisting with the Company’s carry-out programs, and to restore the company’s workforce as quickly as possible once dine-in operations could be safely resumed in accordance with applicable state and local government guidelines.”
The $349 billion program opened April 3 and ran out of money less than two weeks later. On Friday, President Trump signed a bill into law that replenished the program with $310 billion. Of that amount, $60 billion will go to small and mid-sized lenders that assist underserved businesses.