Electric vehicle startup Faraday Future has obtained a $9,167,800 loan from the Small Business Association’s Paycheck Protection Program (PPP), which was recently launched to help small businesses keep people employed during the COVID-19 pandemic, the company tells The Verge.
That’s close to the $10 million maximum allowed in the program, and the loan will be 100 percent forgiven as long as Faraday Future uses it for payroll, interest on mortgages, rent, or utilities, and doesn’t lay off any of the 400 or so employees who are still there for the next eight weeks (or rehires any who were recently let go). News of the loan was first reported in China by state-funded outlet The Paper.
Faraday Future is not the only EV startup to have gotten one of the PPP loans, either. Struggling 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 finally started production on its three-wheeled electric utility vehicle late last year, also applied for a PPP loan according to its own recent SEC filing, and CEO Mark Frohnmayer tells The Verge that the startup should have an update on the outcome of that application in the “coming days.”
The $9 million (and change) comes at what is a crucial time for Faraday Future. The company’s founder and main financial backer, Chinese billionaire Jia Yueting, personally filed for bankruptcy in October. While his creditors (many of which are Chinese companies that lent him money for his failed tech conglomerate, LeEco) are largely on board with the payment plan he proposed, the process of confirming that plan has dragged on for months. Jia has said in court filings that potential investors in Faraday Future are waiting for his own personal bankruptcy case to be resolved before putting any money into the EV startup.
Meanwhile, Faraday Future had just $6.8 million in the bank at the end of July 2019, according to financial statements filed as part of Jia’s bankruptcy. It has spent at least $30,000 per month on Jia’s salary alone since then, as well as $284,000 per month to lease its headquarters in Los Angeles, California (which it sold a year ago in order to generate cash). Faraday Future’s also funding Jia’s bankruptcy. One of the startup’s holding companies lent him $2,687,629 right before he filed, and the court recently approved another $6.4 million loan (which Jia’s lawyers say was “largely” made up of contributions from the management committee currently running the company) from the same entity.
The company has otherwise kept the lights on thanks to a $45 million loan arranged by restructuring firm Birch Lake, which Faraday Future started working with last May.
While smaller, the loan that Workhorse acquired is also likely crucial to keeping the Ohio-based electric trucking startup afloat. Sales of its existing electric truck have cratered, and the company’s future is now highly dependent on winning the bid to build the United States Postal Service’s next-generation mail truck.
Workhorse is also currently highly leveraged like Faraday Future, having taken a $25 million loan at the beginning of 2019 from a hedge fund in order to pay off a previous loan from a different hedge fund. Workhorse did sell the rights to an electric pickup design to its founder Steve Burns last year for $15.8 million, after he created a new EV startup to buy the Lordstown, Ohio factory once occupied by General Motors. Workhorse will get a cut of any sales of that truck and 1 percent of any equity raise that the startup, called Lordstown Motors, is able to secure.
A number of other EV startups in the United States that are trying to get to production are too big 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, which is based in Michigan but already has a number of offices around the country, employs over 2,000 people.
Both of those startups have recently said they’re doing well, with employees getting work done remotely (though Rivian has pushed back the release of its vehicles). But some companies that are already making vehicles in the space are putting employees on unpaid leave, like the electric bus and truck division of Chinese conglomerate BYD, which furloughed 465 people (about 75 percent of the workforce) at its North American headquarters in Lancaster, California last week, according to the state’s employment office. BYD also furloughed 26 people in its North American energy division and 18 more in its corporate offices.
Update April 20th, 7:20PM ET: Faraday Future corrected the amount of the loan it received from $9,176,800 to $9,167,800. The company also now says that it has paid back the $45 million loan set up by Birch Lake. The article has been updated to reflect these two points.