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Publicly traded Bedford tiny house maker returns $6.5 million PPP loan

Legacy Housing Corp. said it hopes the money will be distributed to companies that’ll use it to help employees.

Bedford-based Legacy Housing Corp., a publicly traded company that builds and sells tiny houses and manufactured homes, has returned its $6.5 million loan from the government’s small-business rescue program.

CEO Kenny Shipley said the company made the “difficult decision to return the funds” based on new guidance from the U.S. Small Business Administration that requires companies to return the money if they had alternate sources of capital.

The Paycheck Protection Program was billed as a way for small businesses to keep workers on their payrolls while recovering from the economic pain that grew out of the COVID-19 pandemic.

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“Legacy Housing is a micro-cap public company that sought PPP funds for very simple reasons -- we wanted to ensure our operations would continue to provide affordable housing, to maintain our payroll, and to keep our employees," Shipley said in a statement.

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The company, which had record revenue of $168.9 million last year, said it laid off workers, lowered prices of its products, and cut executive pay and salaries across the company before turning to the SBA-administered program for assistance. Its profit in 2019 was $28.8 million -- a 34% increase over the previous year.

The coronavirus crisis cut into Legacy’s retail sales, forcing the company to slow production, offer discounts on homes and reduce down payment requirements. Its typical customer has annual household income of $60,000 or less.

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"We can only hope that these monies will be distributed to companies that will use these funds to help their employees during this difficult time,” Shipley said.

Legacy received the loan April 10 from Peoples Bank. Only nine days earlier, the company announced a new credit agreement with Capital One that gave it access to an additional $25 million.

The company is the nation’s fourth largest producer of manufactured homes, with its sales primarily concentrated in Texas, Georgia, Kansas, Florida and Oklahoma. Its homes range from 390 to 2,667 square feet, with prices between $22,000 and $140,000. It had 800 employees, including 700 hourly workers, on its payroll at the end of 2019.

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As the PPP program began accepting new applications Monday, the rescue fund’s $349 billion launch round continues to draw critics. Several large public companies -- and the NBA’s Los Angeles Lakers -- are giving back their loans, while others are insisting they followed the rules.

A Dallas hotel group headed by Monty Bennett said it’s keeping the $126 million it received in loans. Fiesta Restaurant Group, parent company of the Taco Cabana and Pollo Tropical brands, earlier said it’s reviewing its eligibility for $15 million in loans it received.

The SBA said Monday that companies have returned $2 billion.

Thousands of small businesses are getting a second chance at a financial lifeline with the program’s new $310 billion lending round, but industry experts expect the funds to run out in a few days. Lenders such as banking giants JPMorgan Chase and Bank of America already had thousands of applications cued up.

PPP is a critical component of the $2 trillion federal stimulus program. It empowers banks to offer federally subsidized loans at terms unavailable on the private market. Borrowers get an interest rate of 1% and can have the loan entirely forgiven if they keep paying employees through the crisis.

Nearly 80% of the small businesses that applied for loans were still waiting for an answer when the first round of funding ran out, according to a survey by the National Federation of Independent Businesses.

Bloomberg contributed to this story.