First of the coronavirus PPP loans have been made forgivable
The first of the Payroll Protection Program loans are now being made forgivable. FOX Business’ Edward Lawrence with more.
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A private jet company reportedly tapped a coronavirus relief fund intended for small businesses — and shared the benefits of the taxpayer-funded loan with its wealthy clients.
According to NBC News, Clay Lacy Aviation, a California aviation management company, received a government-backed loan through the Paycheck Protection Program, an integral part of the $2.2 trillion coronavirus relief package signed at the end of the March.
Congress created the $610 billion program to keep small businesses afloat during the coronavirus pandemic. Companies with fewer than 500 workers can receive loans of up to $10 million; if at least 75 percent of the money goes toward maintaining payroll, the federal government will forgive it.
But CLA's use of the PPP loan highlights how the wealthy have managed to take advantage of the small business rescue program. During the program's first round of funding – which was exhausted in 13 days — a slew of large, public companies received loans, igniting a firestorm of criticism.
The Small Business Administration and the Treasury Department subsequently tried to close the loophole that allowed the big companies to access the fund, including pledging to audit any loan over $2 million before forgiving it. At least 428 public companies received forgivable loans totaling more than $1.36 billion from the program, according to Washington D.C.-based data analytics firm FactSquared. Of those companies, 68 have returned the money, roughly $435 million.
PPP RECIPIENTS COULD FACE LOAN CHALLENGES
In addition to using the money to keep pilots and flight attendants on the payroll, Clay Lacy will extend some peripheral benefits from the loan to its clients who own the jets it manages.
Jet owners who opt-in will receive a portion of credits through a calculation based on the amount of the loan and the cost each owner incurs to employ crew members, according to NBC, which obtained a copy of a letter sent to clients by a top company executive.
"CLA was approved for a loan and recently received funding," Bradford W. Wright, the company’s chief financial officer, wrote in a letter dated April 29. "CLA is prospectively offering aircraft owners a credit for a portion of full-time payroll and employee benefit costs paid through CLA to their respective flight, cabin and maintenance crew members during the covered period.”
DEMAND FOR SMALL BUSINESS LOANS FADES, HERE'S WHY
Clay Lacy and The Treasury Department did not respond to a FOX Business request for comment.
Essentially, crew members keep their jobs, which is required if Clay Lacy wants the loan to be forgiven, and jet owners keep a bigger share of their money that they typically spend on payroll. Although the crew members are legally employed by CLA, it’s viewed as a “pass through” company; jet owners are the ones who hire, fire and set salaries for the employees.
CLA’s client list includes founding Eagle Don Henley, Sexy Brand CEO Mark Bonfigli and private equity firm Blackstone Group, according to a list of aircraft registration numbers provided to NBC by an unnamed source.
Bonfigli told NBC he plans to take advantage of the credit. Blackstone Group declined the offer, a spokesperson said.
HOUSE VOTES TO GIVE PPP LOAN RECIPIENTS MORE FLEXIBILITY
It’s unclear how much money the company received; loans are capped at $10 million per business. The SBA and Treasury have not made the information publicly available. As of Saturday, more than 4.42 million loans worth close to $511 billion had been distributed through the program. Congress allocated about $610 billion to the PPP, leaving roughly $100 billion left over in the fund.
Clay Lacy also received $26.9 million in funding under a separate program run by the Treasury Department, according to Treasury data. The CARES Act carved out $46 billion to help airlines, air cargo companies and businesses “critical to national security.”
Clay received one of the biggest grants — which does not have to be paid back — among private jet companies listed in the data.
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