MiMedx Group in Marietta, which paid $6.5 million this month to settle a federal probe into its business practices, has received a $10 million relief loan designed to help small businesses hurt by the coronavirus.
The loan with Bank of America was approved Tuesday, the company said in a news release. The loan will be forgiven if used for payroll, rent, utilities and other specified items.
It’s one of thousands of loans from the $349 billion federal relief program, which ran out of money last week but may soon be replenished. It was designed to help small businesses, though many big companies and organizations got money, too, including the parent company of Taco Cabana, a restaurant chain with thousands of employees, and Harvard University, which boasts a $40 billion endowment.
Companies wrapped up in federal probes have gotten money, too. MiMedx was charged with knowingly giving false pricing information to the U.S. Department of Veterans Affairs. Quantum, a California tech company that paid a $1 million fine for its accounting practices, received a $10 million loan.
MiMedx, which makes materials used in wound-care products, said it needs the loan because the coronavirus has impacted its business. “Access to treatment has been negatively impacted by shelter in place and social distancing rules and as elective procedures have been canceled or postponed, demand for the Company’s products has softened,” MiMedx said in the release.
MiMedx and former executives, including former CEO Parker “Pete” Petit, are subject to more investigations. Petit and another former executive have been indicted by federal prosecutors in New York for securities fraud. The company also faces lawsuits filed by individuals and groups who allege illegal kickbacks, defamation against outside investors and other matters.
The former executives have been dismissed and MiMedx is now under new leadership, the company said in an emailed statement. MiMedx develops products that help high-risk patients with unhealed wounds and face potential amputations and other consequences. The loan will also help the company’s 350 workers in Marietta and Kennesaw continue to work.
The federal relief loan program has had numerous stumbles. Business owners struggled to submit loans due to technical issues with the Small Business Administration. Many didn't submit applications before the money ran out. Few have gotten their money; about 5% of businesses have received loan proceeds, according to CovidLoanTracker.com.
More money may be on the way. The Senate on Tuesday approved a $320 billion expansion of the federal relief loan program and it still requires House approval.
The program has also been criticized for giving money to large companies that can access the capital markets. DMC Global in Denver got $6.7 million despite having a stock market value of $405 million, according to Morgan Stanley research. DMC could not be reached for comment.
JPMorgan Chase approved relief loans to virtually all large customers that applied, while making very few loans to its smallest customers, according to a Bloomberg analysis of the bank’s data. JPMorgan responded by saying it made a total of 26,500 federal relief loans and about 60% of those went to companies with fewer than 25 employees.
Business leaders have criticized large companies for accessing the relief loans. Starbucks CEO Howard Schultz told CNBC “you’ve seen some pretty shameful acts by some large companies to take advantage of the system.”
The SBA approved about 48,000 loans to Georgia companies for $9.5 billion, representing about 57% of eligible companies’ total payroll. In addition to MiMedx, Perma-Fix Environmental Services in Atlanta received a $5.7 million loan, according to regulatory documents. Loan recipients are not required to report that they received approval and the SBA has not provided information on specific borrowers.
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