Nathan’s Famous hot dog chain has joined the ranks of companies returning COVID-19 relief loans amid outrage over big firms tapping the emergency funds meant to keep mom and pop shops afloat during the pandemic.
The Coney Island restaurant, known for hosting an annual hot dog eating contest, announced in a Monday filing with the Securities and Exchange Commission that it would return the $1.2 million it had received under the Paycheck Protection Program (PPP), the small business loan scheme that was so popular it ran out of money.
The company, valued at some $253 million, is the latest firm to return money after getting a PPP loan. Others to do so include Shake Shack, Ruth’s Chris, and the Los Angeles Lakers.
Nathan’s Famous said in the filing it received the PPP loan several days before the Trump administration issued new guidance (pdf) discouraging companies with substantial market value from applying for the relief funds, which many small businesses—desperate to make ends meet amid the pandemic—could no longer access when the fund was depleted in mid-April.
The PPP scheme was created as part of the $2.4 trillion Coronavirus Aid, Relief and Economic Security Act signed into law by President Donald Trump on March 27. Known as the CARES Act, the emergency relief bill initially earmarked $349 billion for businesses with fewer than 500 employees. Big companies were able to apply for the PPP relief loans under an exemption allowing restaurants and hotels to apply for the funds as long as they didn’t have more than 500 employees at one location.
“We are seeing tremendous backlash because hundreds of thousands of small businesses have not gotten PPP loans,” Chris Allieri, the founder of communications consulting firm Mulberry & Astor, told Business Insider. “Many have had to cease operations because they can’t wait until the next pot of money is approved.”
President Trump on Friday signed a new relief bill that replenished the PPP funds with an additional $310 billion.
The new guidance clarifies conditions for applying for the loans, including that firms must certify that they need the loans and that they cannot access funds elsewhere.
“Borrowers still must certify in good faith that their PPP loan request is necessary,” the Small Business Administration, which administers the loans, stated in the new guidelines (pdf). “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.”
As of Tuesday morning, at least 248 public companies had disclosed receiving some $905 million in PPP loans, according to data analytics company FactSquared, which compiled SEC filings.