As the Small Business Administration lending program doled out hundreds of billions of dollars, public companies, deep-pocketed chains and prep schools have come under pressure to return taxpayer money so needier small companies can receive assistance.

But another group of businesses has received much less attention: Small firms that are doing well but pursued money anyway.

“Business for some of you is better now than what it was before the virus," Spencer Patton, a small-business owner in Nashville, said in an instructional video last month for FedEx Ground contractors, part of a YouTube series Patton publishes online. "Some of us have that. I have operations myself that are doing Christmas-like volume even though the virus has killed so many other businesses, and some people kind of have a moral qualm, saying, ‘Should I kind of take the stimulus money?’ ”

Patton is a FedEx Ground contractor himself, employing about 225 people in 10 states. He argued in his tutorials that the fund can be used for the risks they take as business owners. Workers at companies deemed “essential” by the government often risk infection to deliver packages, stock shelves or clean offices or complete construction projects.

"Don’t feel like this is a handout or something that you should feel ashamed about taking if your business hasn’t been negatively impacted by it,” said Patton (who does not speak for FedEx Ground).

There is no public data on how many well-off companies received loans from the fund, called the Paycheck Protection Program. Only public companies have been required to release whether they received a loan.

But shipping businesses, cleaning companies, defense contractors and law firms have pursued loans even though they’re doing well, according to business owners, bankers and consultants who have worked on applications.

With limited guidance from the government, decisions about whether companies have been sufficiently harmed have largely fallen to the applicants themselves and their banks.

“My thought is that we should have, from day one, had some kind of means testing,” said Eric Hovde, chief executive and chairman of Sunwest Bank of Irvine, Calif. Hovde said as he processes loans from the program he is wary of sending money to companies that don’t appear to be at risk of cutting jobs.

“You should have had to somehow quantify that you were severely or somehow financially impacted,” he said.

According to the rules set by the $2.2 trillion economic stimulus legislation, the Cares Act, applicants for small business funds “shall make a good-faith certification that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.”

After Congress passed a new round of funds, the administration issued new guidance, saying it would review all loans in excess of $2 million and review other loans as appropriate. The SBA says applicants should take into account “their current business activity and their ability to access other sources of liquidity.”

The SBA is “relying on the good faith of the small business owners,” said Steve Bulger, acting regional administrator for the Mid-Atlantic. He said he had not heard of many industries that had not been negatively affected in some way by the pandemic. “But certainly some companies have been impacted a lot more than others in the small-business world," he said. "It’s good that some small-business owners, if they originally signed up thinking they might need the help and then didn’t end up needing it, I commend them for either turning the money down or sending it back and making it available to other businesses.”

In an interview, Patton said the government’s language about “the uncertainty of current economic conditions” certainly seemed to include contractors like his.

“We’re in an industry that has been classified from the beginning as an essential service," he said. "We care about our employees a ton, we know their names, we know their families, and they are out there risking their lives.”

David Nilssen, who funds small businesses through his Seattle-based firm Guidant Financial, said he has heard from clients who run UPS shipping franchises, cleaning companies and manufacturers of parts for laptop computers that business is busy and growing.

They ask about applying for PPP funds anyhow, and some of them get approved.

“My advice to them has been: Do not take it," Nilssen said. "That is there for people who need it. There are millions of businesses who need it and many of them are going to be left out. If they have not been negatively impacted by this, they should not be applying.”

After funds run dry, outrage

The administration’s hurry to get money out the door was backed by economists across the political spectrum who advised that the government aggressively pump money into the economy rather than focus on discerning which companies are most deserving.

“Given more time I think they would have targeted businesses more," said Richard Prisinzano, an economist at the University of Pennsylvania’s business school and former Treasury Department official.

Overall though, he said the government had done well getting money out to companies that needed it. “It’s not going swimmingly, but I don’t think our expectations should be much higher," he said.

After the first $349 billion small-business fund ran dry ― with more than 80 percent of applicants not receiving money ― much of the outrage from those who missed out was directed at publicly traded chains that disclosed taking funds in filings to the Securities and Exchange Commission.

Some of the companies, including Shake Shack, Ruth’s Chris Steak House and Potbelly sandwiches, returned the funds, with executives explaining they had played by the government’s rules but acknowledged they had access to private capital. The government has asked other large, publicly traded firms to return funds by Thursday with no penalty.

But many of the publicly traded firms, such as hotel and restaurant chains, had at least suffered massive declines in business. In giving back the money, many executives acknowledged having access to other capital but explained that they were planning to spend most of the money paying workers, as the program requires.

“When the COVID-19 pandemic hit, our priorities were keeping our employees safe and securing their jobs,” said Lev Peker, chief executive of U.S. Auto Parts Network, a Carson, Calif.-based network of auto-parts sellers, in an email. In the fourth quarter of last year, the company reported its highest gross in eight years.

On April 10, the company received $4.1 million in PPP loans. Since then the company has mostly been allowed to continue operating, and its stock price has risen.

Peker said he’s returning the money.

“The program was designed to protect jobs, and we are returning the money so it can continue to do so for other companies and other employees,” he said in the email.

Applicants include many law firms

According to new data the Treasury Department and SBA released Sunday, the average loan size in the second round of funding is $79,000, which Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza called “yet another indicator that the program is broadly based and assisting the smallest of small businesses."

The SBA has declined to release the names of companies that have received the loans, so the performance of recipient firms is not known, but some companies that are applying appear to be doing fine.

Law firms with hundreds of attorneys are eligible to apply, even though much of their work can be done remotely and many of them are likely to see booms in business thanks to litigation, new tax rules and other changes resulting from the pandemic. One expert told that “many, if not, almost all” law firms with less than 500 employees are applying.

Defense contractors have also received money despite often holding years-long contracts mostly unaffected by the shutdowns because they’re funded by military spending.

New York-based CPI Aerostructures, which works on structural assemblies for military aircraft, gets about two-thirds of its $83.9 million annual revenue from military contracts, most of it from the Air Force, according to public filings.

The company received $4.8 million in small-business funds and has not said whether it will pay back the loan. Company representatives did not respond to a request for comment for this story.

“I don’t have as big a problem with some of those bigger restaurant groups accessing [PPP funds], because if it helps them save jobs, it helps them save jobs," said Hovde, of Sunwest Bank. "My bigger problem is with companies that have not been financially impacted getting the money.”

The shipping business has not wholly benefited from the pandemic. Although deliveries to residences are booming, deliveries to businesses are way down. FedEx Ground spokesman Perry Colosimo said that “while the growth of e-commerce has risen during the pandemic, the demand for business-to-business has declined.”

Colosimo said the decision about whether to apply for government funds “is solely at the discretion of each service-provider business.”

Patton said he doesn’t think companies should be vetted for loans based on the harm they’ve endured. He declined to say how much he is seeking in PPP money but said he would use some of the funds for hazard pay, since his workers are putting in long hours and risk being infected.

“Just because a business is shut down doesn’t make it more significant in terms of providing funding,” he said. “Both are important. I don’t know that it’s a necessary distinction between the two. I don’t think I’m taking money out of somebody else’s pocket.”

Aaron Gregg contributed to this story.

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