The owner of the Atrium Hotel in Hutchinson was approved for a federal Paycheck Protection Program loan in April – four months after the hotel closed.
Texas-based Herring Bank granted the $133,400 loan to Hutch Joseph Investments LLC. The business owner, Joshua Joseph, lives in the Dallas area.
Details publically released about the loan show the loan application was based on retaining 53 employees.
Joseph acknowledged that was the number of people employed there when the property suddenly closed on Dec. 20, 2019.
Joseph told The News this week, however, that the loan was to maintain and provide security for the property.
“We still have a mortgage and people working around there, security and things,” he said.
He declined to say how many people he is currently employing at the property, but entrances to the hotel were boarded up in recent weeks because of repeated break-ins.
Hutch Joseph Investments LLC, the company formed in 2014 to purchase and operate the hotel, remains registered with the Kansas Secretary of State’s office in good standing.
Joseph said the property remains for sale, but his asking price is $3 million, and he has received no offers.
Joseph said he did apply for the PPP loan, “but we are still waiting on it.” Information released by the U.S. Small Business Administration, which is administering the federal program authorized by Congress, indicates the loan was approved on April 9.
The PPP loan program was created, as the name suggests, to keep people employed during shutdowns or due to other restrictions prompted by the global novel coronavirus pandemic.
Legally, however, a company could use the loan for other purposes, such as mortgage or lease payments and utilities, said an SBA spokesman in Wichita.
“It could be a straight low-interest loan, at a 1 percent interest rate,” said Michael Aumack, Public Information Officer and Economic Development Specialist. “It has to be paid back within two years.”
“What’s not legal is to submit fraudulent forgiveness,” he said. “To give fake receipts to a lender so the whole thing is forgiven. If they haven’t applied for forgiveness, it’s still a loan.”
The borrower has 10 months from the loan disbursement date to apply for loan forgiveness, which requires that at least 75 percent of the loan was used for payroll.
Aumack was unable to say whether Joseph had done so.
If a straight loan, its use must be for business expenses tied directly to the entity, Aumack said.
“If that LLC is solely for that property, it has to be for that business,” he said. “Where people get in hot water is when they use it for purposes other than the business, such as personal uses or to buy cars.”
The SBA is reviewing all loans over $150,000, but not those below that.
The onus, another SBA official said on background, is on the lenders, who could lose access to other SBA loans if fraud is discovered.
Data on the loans of under $150,000 showed banks granted 791 loans to entities in Hutchinson, worth $23.57 million. About 150 of those were for $100,000 or more, but nearly two-thirds were for less than $25,000.
The loan to Hutch Joseph Investment was the eighth highest loan in Hutchinson. Slightly larger loans – the top being $137,800 – went to Barkley Plumbing, Midwest Iron, Ely’s Machine Repair, Reno County Historical Society, Mark Borecky Construction, Wray & Sons Roofing, and Our Redeemer Evangelical Lutheran Church.
There were 13 hotels in Hutchinson that received PPP loans, totaling about $533,000. However, half were under $20,000, and the lowest nine combined were nearly equal to the amount the Atrium owner was approved for.
The loan list also showed Joseph obtained a loan through another company, Andrea Investments LLC, which operates the Ambassador Hotel in Salina. That loan, for $67,000, was based on 16 employees. That loan was also through Herring Bank.
The SBA data shows other loans made by Herring Bank in Kansas went to four hotels in Liberal, three of which list Kirit Bhakta as the resident agent. The fourth was a sole proprietorship not registered with the state.