At least two companies in New Jersey, both publicly traded, said they returned money they received under a federal small business loan program meant to offer a lifeline to businesses that have seen their revenues dry up during the COVID-19 pandemic.
Newark-based IDT Domestic Telecom, which was initially awarded a $10 million loan, and Warren-based pharmaceutical company Aquestive Therapeutics, which got a $4.8 million PPP loan, both fully repaid the amounts.
The program has fallen under public scrutiny over whether federal aid money – under the Paycheck Protection Program – went to well-financed companies that did not need it, rather than struggling Main Street, mom-and-pop shops.
The PPP program was signed into law by President Donald Trump as part of the $2.2 trillion federal Coronavirus Aid, Relief, and Economic Security, or CARES, Act on March 27, with the goal of injecting cash into businesses that have taken a financial hit amid government restrictions imposed to combat the COVID-19 outbreak.
In New Jersey, businesses have been ordered to shut their doors in a statewide effort to stop the spread of the virus, while nationwide tens of millions of Americans have lost their jobs, reduced spending or avoided most travel to reduce the risk of exposure.
Public filings from the Securities and Exchange Commission and compiled by the Washington, D.C.-based analytics firm FactsSquared showed that at least 220 publicly traded companies were awarded at least $870 million under the program as of April 19.
Eleven of those companies were in New Jersey, with loans totaling a combined $33 million. That still amounts to a drop in the bucket of the $9.5 billion awarded to 33,519 companies in New Jersey.
“Before we forgive these loans, we’ll check every single one over $2 million,” U.S. Treasury Secretary Steven Mnuchin told Fox News in a recent interview.
“So anybody that took the money that shouldn’t have taken the money, one it won’t be forgiven, and two, they may be subject to criminal liability, which is a big deal.”
The U.S. Small Business Administration, which oversees the program, opened up applications on the morning of April 27 for a second round of $310 billion, after the first tranche of $349 billion was exhausted in two weeks.
Of the 1.6 million loans awarded nationwide, 74 percent were for less than $150,000, according to SBA spokesperson Matt Coleman. The names of those remaining PPP recipients in New Jersey have not been publicly disclosed.
In late April, U.S. Treasury officials warned that publicly traded companies that were awarded a PPP loan must show in “good faith” that they actually need the money, or repay it by May 7.
“This was a program designed for small businesses. It was not a program that was designed for public companies that had liquidity,” Mnuchin told CNBC in a recent interview.
According to the Treasury guidelines, “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.”
In New Jersey, “IDT Corp. stated that, in light of the oversubscription of applications for loans under the PPP, and despite its need for the funds to support operations, it is returning the loan proceeds in order to make those funds available to other borrowers that may be in greater need,” reads an April 27 public filing.
Aquestive indicated in a statement that although the PPP loan would have helped its 219 employees in Indiana and New Jersey, the new federal guidance ultimately created a “new strong presumption” that public companies are ineligible for the program. “As a result, we have decided that it is in the best interests of our company and our constituents to pay off the PPP loan within the time period imposed under these new guidelines,” the statement reads.
A number of New Jersey companies that received PPP loans did not respond to requests for comment, and SEC records as of April 29 indicate that they have not returned the money.
Rasmey-based biopharmaceutical company ADMA Biologics was awarded a $5.4 million PPP loan. Princeton-based manufacturer Mikros Systems was awarded a $753,300 loan. Edison-based Hepion Pharmaceuticals received $176,585. East Rutherford-based food manufacturer MamaMancini’s Holdings got $330,000.
Parsippany-based cancer-treatment research company Interpace Biosciences was awarded a $3.5 million loan. East Hanover-based software company Silversun Technologies was awarded a $3.1 million PPP loan. Princeton-based pharmaceutical company Soligenix received a PPP loan of an undisclosed amount.
Lawrenceville-based cancer-treatment research company Celsion was awarded a $632,200 loan, and company officials said they intended to keep and use the money. “The PPP allows us to keep our 30 employees fully employed and continue to conduct related R&D … because of this program, we haven’t laid off any employees,” Celsion President and Chief Executive Officer Michael Tardungo told NJBIZ.
“We’re restricted in our ability to raise capital. We’re essentially out of the market for the time being. We can’t sell stock,” he added. [O]ur application … perfectly applies to what Congress and the administration intended – to protect jobs, and to ensure that our employees are gainfully receiving a check.”
Old Bridge-based technology R&D and manufacturing company Blonder Tongue Laboratories indicated it intends to keep its $1.7 million PPP loan. “Although we are a publicly traded company, with 2019 revenues under $20 million and approximately 100 employees, we think we clearly fall within the small business category the PPP program is intended to serve,” Blonder said in a statement.
“We are not like larger public companies, with a significant market capitalization and a variety of financing options,” the statement continues. “Our modest operations and small market capitalization significantly limit our financing options, particularly in a time of economic uncertainty.”