Shocking report shows US companies cashed in on loans but did not need help
The US government loans meant to help small businesses that were taking the brunt of the stringent lockdown measures. Companies applying for the funds had to demonstrate they did not have enough cash on hand to cover expenses like rent and employee’s salaries.
Up to 8.1 million pounds ($10 million), were supposed to keep them afloat for eight weeks
Forty-one publicly traded companies who claimed the help were found to have enough funds to cover their basic expenses for two months or more when they processed the application.
And thirty were able to cover three months or more.
Up to six companies had enough cash to cover them at least until December, according to the review.
The study based its findings on average monthly operating expenses from 2019.
Seventeen of the 41 recipients had market capitalisations of at least $100 million.
These 41 companies were granted the funds, while smaller companies with far less money were turned down.
Danielle Brian, executive director of the Project On Government Oversight, a non-profit that monitors government spending, said: “It’s disheartening to see relief spending go to companies that don’t appear to desperately need a lifeline.
“This shows just how urgently we need more oversight of this program and the rest of the federal government’s relief spending.”
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Reuters analysed the latest available financial data for 276 publicly traded companies that claimed the loans in the first round of the US government’s Paycheck Protection Program (PPP) in April.
The list includes businesses tracked by data provider FactSquared until the end of April.
The PPP scheme, created by Congress to help small companies, was criticised because publicly traded businesses who received the loan could have got the funds elsewhere, as they had easier access to capital markets.
Until now, the borrowers’ proof of their financial difficulties had not been closely investigated, with the Reuters led investigation being the most exhaustive to date.
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Part of the application process involves declaring in good faith that “current economic uncertainty makes this loan necessary to support” their ongoing activity.
In regulatory documents and in press releases, some of the 41 companies had a different tone as they received the loans, indicating optimism about their finances.
At least five of the 41 made statements affirming strong financial statuses or projecting further incomes because of the current situation.
Among them was biotech firm Athersys Inc (ATHX.O). It issued an optimistic statement in an April 15 securities claim for a $50 million share offering.
In the statement, the company also said it had secured a $1.3 million PPP loan.
“As of the date of this prospectus supplement, the COVID-19 pandemic has not had a significant adverse effect on our business,” the company wrote.
Medical supply manufacturer Repro Med Systems Inc (KRMD.O) and electronics supplier Micropac Industries Inc (MPAD.PK) said the global crisis had not heavily impacted their businesses.
Diagnostics firm Enzo Biochem Inc (ENZ.N) said it expected coronavirus related products to partially offset income downturns.
Infectious disease testing company Accelerate Diagnostics Inc (AXDX.O) said its first-quarter revenue was expected to increase – and entered into a collaboration for coronavirus testing.
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