Strip-club stimulus reveals lingering uncertainties over US small-business aid

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Backlights off, music quiet and poles bare, strip clubs across the United States closed earlier this year in the face of COVID-19 ...

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 US$660 billion Small Business Administration loan program would help them weather the lockdown.

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? One of Shafer’s clients, John Meehan, said he does not expect a straight answer from the SBA anytime soon.

“Under those guidelines, applicants were responsible for certifying that they met applicable SBA eligibility requirements, and lenders were not required to independently verify such eligibility,” she said.Running afoul of the still-unclear SBA rules poses a potential hazard for lenders, who risk getting stuck with unforgiven loans on their books or litigation, lawyers said.

Meehan is not the only one faced with the muddle. RCI Hospitality Holdings Inc operates more than 35 strip clubs including the self-described “largest strip club in the world,” Tootsie's Cabaret, in Miami. Meehan’s Pennsylvania clubs remain shuttered, but his New Jersey establishment, which received a loan, has a liquor license for the outdoor patio. So while empty stools are stacked on the bar inside, outside the dancers work an improvised stage.

 

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