When it came to federal pandemic relief, a second bite of the apple paid off for Potbelly.
The Chicago-based sandwich chain, which returned its first $10 million Paycheck Protection Program loan under pressure only to go back and get a second one, was notified by the Small Business Administration last week that the outstanding $10 million balance will be fully forgiven.
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Potbelly secured the second $10 million PPP loan in August 2020 and applied for forgiveness last year. The SBA “manually reviewed” all PPP loans above $2 million to determine eligibility for forgiveness, according the agency. In March, Potbelly warned investors it might be responsible for paying back “all or a portion” of the five-year note, depending on the SBA’s determination.
On July 12, Potbelly received notification from its lender, Harvest Small Business Finance, that the SBA approved forgiveness of the entire outstanding principal and accrued interest for a total of nearly $10.2 million, according to a Securities and Exchange Commission filing Friday.
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A Potbelly spokesperson did not immediately return a request for comment Monday.
Launched by the SBA at the onset of the COVID-19 pandemic in April 2020, the first round of the PPP offered businesses with fewer than 500 employees forgivable loans of up to $10 million to cover eight weeks of payroll. The initial $349 billion in funding ran out in less than two weeks, with many smaller businesses shut out, as banks allegedly prioritized larger clients ahead of mom-and-pop businesses.
That led to pushback from lawmakers and small-business advocates, pressuring some larger small companies, including publicly traded restaurant chains such as Ruth’s Chris, Shake Shack and Potbelly, to give back their loans.
Demand fell off during the second round of PPP amid concerns about loan forgiveness, and Potbelly decided to apply again in August 2020, as the program was set to expire. The federal government relaunched the PPP in January 2021 for a third round of funding.
The SBA approved 11.4 million loans worth nearly $788 billion during the three rounds of PPP. As of July 10, the SBA has forgiven about 10.3 million loans worth nearly $743 billion, or more than 94% of the total PPP loan value.
Potbelly has grown from a single store on Lincoln Avenue in 1977 to a nationwide chain. As of December, Potbelly had about 5,500 employees operating 397 company-owned shops and 46 franchised locations in 33 states. There are 111 company-owned restaurants in Illinois.
The company generated $380 million in revenue last year, reporting a net loss of $23.8 million.
