Potbelly returned its first $10M PPP loan after public uproar — then it applied for another one

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Potbelly has received another $10 million loan through the taxpayer-funded Paycheck Protection Program — but this time around, the Chicago-based sandwich chain intends to keep the money.

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The company, which returned a $10 million loan it received in April amid public outrage, disclosed in a regulatory filing last week that it had obtained a $10 million loan through the small business rescue program, a $670 billion fund that was created in March when Congress passed the CARES Act. 

The loan was approved Aug. 7, the Securities and Exchange Commission filing shows, one day before the PPP closed to new applicants with roughly $138 billion remaining in the fund.

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“While we qualified for a loan in the first round of the Payroll Protection Program, we returned it when it looked like many other companies would be left without help,” Potbelly said in a statement provided to FOX Business. “In the next round, the program was about to close with billions of dollars in available funds still remaining.”

TickerSecurityLastChangeChange %
PBPBPOTBELLY CORPORATION4.51-0.20-4.25%

The company said it continues to be "significantly impacted" by the pandemic and remains "well below" pre-crisis levels.

The program — designed to keep small businesses afloat and avert mass layoffs — was open to any business with fewer than 500 employees per location. So long as 60 percent of the money goes toward maintaining payroll, the federal government will forgive it, essentially turning the loan into a grant.

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At its onset, the program drew criticism for granting multimillion-dollar loans to large, public companies, including Potbelly, as the initial $349 billion that Congress allocated to the fund evaporated within 13 days. Other chains that returned the money under public pressure include Shake Shack and Ruth's Chris Steak House.

At least 440 public companies received forgivable loans totaling more than $1.39 billion through the program, according to Washington, D.C.-based data analytics firm FactSquared. Of those companies, 69 returned the money, or roughly $436 million.

The Trump administration scrambled to close the loopholes that had allowed those businesses to tap the fund, including pledging to audit any loan worth more than $2 million. The government also required that companies make a “required certification in good faith” that the PPP loan request is necessary.

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"We were surprised and disappointed when the fund was quickly exhausted, leaving many without help," Potbelly said in a statement announcing it would return the funds. "We are returning the PPP loan after further clarification from the Treasury Department."

Lawmakers eventually voted to inject another $310 billion into the program at the end of April, but demand had already leveled off over concerns over forgiveness. Congress loosened the restrictions of the program to give borrowers more flexible terms, including reducing the percentage of the loan that must be spent on payroll to 60% from 75%.

The new five-year loan that Potbelly obtained is at a 1% interest rate. The company said it intends to apply for forgiveness of a "portion of the loan."

"To protect our employees’ jobs, and support their families that rely on Potbelly for their livelihoods, we applied for and received a loan," the company said in its statement. "The funds will go to our dedicated employees, to preserving jobs and to keeping shops open."

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