The company said Saturday that its sales dropped dramatically when COVID-19 hit, forcing it to furlough employees and close shops. Potbelly applied for and qualified for assistance under the program.
"We were surprised and disappointed when the fund was quickly exhausted, leaving many without help," the company said in a news release. "We are returning the PPP loan after further clarification from the Treasury Department."
RELATED: Government small business lending program on hold after reaching lending limit
The Chicago-based sandwich shop has about 6,000 employees and annual revenues of more than $400 million, according to FactSet.
The PPP is intended to help small businesses with fewer than 500 employees. Its initial $349 billion in funds ran out last week and the House gave final approval to $310 billion in additional funds Thursday.
The Small Business Administration issued an advisory Thursday clearly aimed at companies like restaurant chains Ruths' Chris Steak House and Potbelly that received loans under the Paycheck Protection Program. The guidelines imply that unless a company can prove it was truly eligible for a loan, the money should be returned by May 7.
RELATED: Shake Shack says it will return $10 million PPP loan
Earlier this week, an Associated Press investigation documented how dozens of publicly listed companies collectively received hundreds of millions of dollars of loans from the program's first round. According to data compiled and analyzed by AP, through Wednesday at least 147 publicly traded companies disclosed receiving $555 million since the program opened April 3. Some had market values well over $100 million. Many had executives that were paid millions each year.
After a swift public backlash, several companies have announced they're returning their loans, including the New York-based burger chain Shake Shack, which got a $10 million loan and Kura Sushi, which is based in Irvine, California, and got nearly $6 million. A third company, Boston-area biotechnology company Wave Life Sciences USA Inc., told the AP that it started the process to repay the $7.2 million loan it received.
Florida-based Ruth's Chris also announced it is returning its $20 million in loans, according to news reports.
The SBA's new guidelines require companies to certify with their lender that they need the loan and cannot access the money from other sources. Given that public companies have access to capital markets, the SBA says it is unlikely they "will be able to make the required certification in good faith."
The initial rules of the program allowed bigger companies such as restaurants and hotels with under 500 workers per location to apply for the loans.
Copyright © 2020 by The Associated Press. All Rights Reserved.
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