Electric vehicle startup Faraday Future secured a loan of $ 9,167,800 from the Small Business Association’s Paycheck Protection Program (PPP), which was recently launched to help small businesses retain employees during the COVID-19 pandemic, the company tells The edge.
That’s near the maximum of $ 10 million allowed in the program, and the loan will be 100 percent forgiven as long as Faraday Future uses it for payroll, mortgage interest, rent, or utilities, and will not lay off any of the 400 or so employees who are still there for the next eight weeks (or rehire those who were recently laid off). News of the loan was first reported in China by a state-funded point of sale The paper.
Faraday Future is also not the only electric vehicle startup to have secured one of the PPP loans. Ailing electric trucking startup Workhorse received a PPP loan of $ 1,411,000, according to a recent filing with the Securities and Exchange Commission (SEC). Arcimoto, which has finally started production of its three-wheeled electric utility vehicle at the end of last year, also applied for a PPP loan according to his own recent SEC filing, and CEO Mark Frohnmayer said The edge that startup should have an update on the outcome of this request in the “next few days”.
The $ 9 million (and the change) comes at a pivotal time for Faraday Future. Company founder and main funder Chinese billionaire Jia Yueting personally filed for bankruptcy in October. While his creditors (many of whom are Chinese companies that loaned him money for his failed tech conglomerate, LeEco) largely agree with the payment plan he has proposed, the process of confirming this plan dragged on for months. Jia has said in court records that potential investors in Faraday Future are waiting for his own personal bankruptcy case to be resolved before investing any money in the EV startup.
Meanwhile, Faraday Future only had $ 6.8 million in the bank at the end of July 2019, according to financial statements filed in connection with Jia’s bankruptcy. Since then, she has spent at least $ 30,000 per month on Jia’s salary alone, as well as $ 284,000 per month to rent her headquarters in Los Angeles, Calif. (Which it sold a year ago in order to generate cash). Faraday Future is also funding Jia’s bankruptcy. One of the startup’s holding companies loaned it $ 2,687,629 just before it was filed, and the court recently approved another $ 6.4 million loan (which Jia’s lawyers said was ” largely ‘made up of contributions from the management committee that currently runs the company) of the same entity.
The company also kept the lights on thanks to a $ 45 million loan arranged by restructuring firm Birch Lake, that Faraday Future started working with last May.
While smaller, the loan Workhorse acquired is also likely crucial in keeping the Ohio-based electric trucking startup afloat. Sales of its existing electric truck have slumped and the future of the company is now heavily dependent on securing the tender to build the United States Postal Service’s next-generation mail truck.
Workhorse is also currently heavily in debt like Faraday Future, having taken out a $ 25 million loan in early 2019 from a hedge fund to repay a previous loan from another hedge fund. Workhorse sold the rights to an electric pickup design to founder Steve Burns last year for $ 15.8 million, after Created a New EV start-up to buy Lordstown, Ohio plant formerly occupied by General Motors. Workhorse will get a cut on all sales of that truck and 1% of any capital raise the startup, called Lordstown Motors, is able to get.
A number of other electric vehicle startups in the United States trying to go into production are too large to qualify for the loans. Lucid Motors, which is backed by Saudi Arabia’s sovereign wealth fund, has at least 600 full-time employees at its headquarters in California. Rivian, who is based in Michigan but already has a number of offices across the country, employs more than 2,000 people.
These two startups have recently said they were fine, with employees do the work remotely (although Rivian pushed back the exit of his vehicles). But some companies that already manufacture vehicles in space are putting their employees on unpaid leave, such as the bus and electric truck division of Chinese conglomerate BYD, which has put 465 people on leave (about 75% of the workforce). ) to his North American Headquarters in Lancaster, Calif., last week, according to the state employment office. BYD also laid off 26 people in its North American energy division and 18 more in its offices.
Update April 20 at 7:20 p.m. ET: Faraday Future corrected the loan amount received from $ 9,176,800 to $ 9,167,800. The company also now says it has repaid the $ 45 million loan put in place by Birch Lake. The article has been updated to reflect these two points.