Political news site Axios has handed back its near $5 million federal small business loan.
Jim VandeHei, cofounder and chief executive officer, made the announcement on its site after the venture-backed company received criticism over taking the loan from the $349 billion Payment Protection Program, aimed as an incentive for small businesses to keep their workers on the payroll.
The PPP, run by the Small Business Administration, offers struggling small businesses up to $10 million and will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.
But in the weeks since the first round of PPP funds was made available, it emerged that a number of venture-backed or larger public companies were approved for the loans while many small businesses were not.
In the case of Axios, it has 190 employees, much less than the 500 limit for a freestanding company, but the criticism stemmed from the fact that it is a media organization covering the federal government. It’s also thought to have raised tens of millions of dollars in past rounds of funding, with wealthy backers including Laurene Powell.
“There has been a public backlash against a variety of companies for taking the PPP, including us,” VandeHei said. “Some critics say media companies like ours should not qualify, period. Others argue that venture-backed start-ups should seek capital elsewhere, even if it hurts the business.
“While applying for the loan felt like the right and prudent thing to do one month ago to protect our 190 employees, if we knew then what we know now, we would have gutted it out and hoped for the best,” he added.
Instead of the PPP loan, VandeHei revealed that Axios is close to securing funds from an alternative source of capital.
Ruth’s Hospitality Group Inc. and Shake Shack Inc. were among the larger public businesses approved for loans due to an exemption for large restaurant chains and hotel groups. After coming under fire, Shake Shack, which has more than 7,000 employees, repaid its $10 million loan. Ruth’s Hospitality followed suit.
The Los Angeles Lakers were also in the news for receiving a $4.6 million loan, which has since been handed back.
Apart from Axios, The Seattle Times, The Tampa Bay Times and Bustle Digital Group are some of the few media companies that received loans.
BDG was approved for a $7.5 million loan on April 16, two weeks after it implemented a series of cost-cutting measures, including laying off two dozen staffers, introducing a temporary tiered pay reduction and shuttering Millennial-focused site The Outline.
A BDG spokeswoman said the loan will enable the company “to partially undo salary reductions across the company and expand hours for part-time and freelance writers.” It did not add anything about those that had already been laid off.
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