The latest on the SBA’s “prurient clause”, published Tuesday at The New York Times
Backlights off, music quiet and poles bare, strip clubs across the United States closed earlier this year in the face of COVID-19 social-distancing measures that precluded the up-close nature of the exotic dancing industry. Like many businesses, these cabarets, lounges and gentlemen’s clubs hoped a $660 billion Small Business Administration (SBA) loan program would help them weather the lockdown.
But nearly four months since the launch of the loan initiative known as the Paycheck Protection Program (PPP), it is still unclear whether the SBA can make it rain for them. The Trump administration has barred companies that “present live performances of a prurient sexual nature” from participating. Clubs sued, and two federal judges rebuked the SBA for excluding the establishments from receiving the forgivable loans meant to protect jobs amid the health crisis.
For a government loan program that has been plagued by criticism – duplicate loans, borrowers without clear financial need, inconsistent data – the strip-club uncertainties are yet another example of confusion surrounding an initiative that pushed hundreds of billions of dollars out the door.
Will the SBA allow clubs that have not won a court order to participate? And for those that received loans, either through court order or from banks that apparently took a broad interpretation of the law, will the government forgive the loans, as it does for other borrowers?
“The ball is in the SBA’s court right now,” said Brad Shafer, an attorney who convinced a federal judge in the U.S. District Court for the Eastern District of Michigan to issue a ruling in May ordering the SBA to work with more than 50 strip clubs. “We still don’t know the end of this story.”
Using loan data released by the SBA earlier this month, Reuters identified 36 organizations representing dozens of strip clubs across the country that were approved for between $11.15 million and $27.95 million worth of loans from the small business pandemic aid program.