Private equity firms and many of their portfolio companies, including physician practices and other provider organizations, are unable to access the small business Paycheck Protection Program authorized under the $2 trillion Coronavirus Aid, Relief, and Economic Security Act.
The $350 billion Paycheck Protection Program is open to businesses with fewer than 500 employees. However, the Small Business Association's affiliation rules apply to the program, meaning each private equity firm and their portfolio companies are seen as one entity. If the total number of employees exceeds 500, they can't access the loans available through the program, according to S&P Global.
The private equity industry is lobbying in Washington to gain access to the loans. The Association for Corporate Growth argued the affiliation rules are unfair and too broad in a letter to Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker Nancy Pelosi, D-Calif.
"We strongly urge you to waive the overly broad 'affiliation' rules that are unfairly preventing countless small businesses from being eligible to receive the assistance they desperately need," the group wrote. "We urge you to waive the 'affiliation' rules to prevent imminent layoffs throughout the country."
Venture capital-backed startups are also seeking access to the loans and have asked the Small Business Association to provide flexibility in the affiliation rules. They have the support of Ms. Pelosi and Representative Ro Khanna, D-Calif., who sent a letter to Treasury Secretary Steven Mnuchin and Jovita Carranza, administrator of the SBA, asking them to allow venture capital to access the small business loans.
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