Like burger chain Shake Shack, the Los Angeles Lakers received money from the United States’ loan program aimed at small businesses to offset financial damages caused by the coronavirus pandemic. In a statement, the Lakers told ESPN’s Kevin Arnovitz on Monday that they returned the $4.6 million they got after applying for the loan through the Small Business Administration’s Paycheck Protection Program.
The Lakers are a multibillion-dollar business. Of the NBA’s 30 teams, they have the richest local broadcast deal. Nonetheless, they technically qualified for emergency funding.
Here is their statement and some context:
“The Lakers qualified for and received a loan under the Payroll [sic] Protection Program,” the Lakers said in a statement to ESPN. “Once we found out the funds from the program had been depleted, we repaid the loan so that financial support would be directed to those most in need. The Lakers remain completely committed to supporting both our employees and our community.”
The program, which was established as part of the $2.2 trillion CARES Act and launched on April 3, enables small businesses to apply for and receive loans to cover employee salaries and other expenses. As a business with about 300 employees, the Lakers were eligible for a PPP loan, which is forgivable so long as the recipient spends 75% of the amount on payroll and doesn’t fire anyone.
The PPP ran out of money after less than two weeks, leaving many mom and pop businesses without the assistance they sought. Some of those loans went to high-profile companies with strong relationships with commercial or private banks, who were able to simplify the application process for their clients.
The Lakers made the decision to return the money “in the days following the news that the PPP had exhausted its funds,” according to ESPN. By that point, the technical issues during the rollout of the first round of the program were well-documented, and there was uproar about companies such as Shake Shack, Ruth’s Chris Steak House and Potbelly Sandwich Shop receiving loans while smaller businesses in more dire need did not.
More than 200 publicly traded companies qualified and were given more than $750 million, according to the New York Times. Some of those companies have returned the money.
Last Thursday, the Small Business Administration updated its guidelines for the PPP, urging larger and wealthier businesses not to apply, as every borrower has to “certify in good faith that their PPP loan request is necessary.” This did not, however, Here’s an excerpt from the document:
Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, 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 ESPN noted, the Lakers clearly fall in this category. The second round of the relief fund started Monday.