Many lenders struggled to process applications after the program launched Friday. Treasury Secretary Steven Mnuchin spoke at the White House on Thursday.
Photo: Kevin Dietsch/Bloomberg NewsWASHINGTON—More startups might be able to access the federal government’s emergency small-business lending program under new guidance the Treasury Department released late Friday, the day the program launched.
Federal regulations can make it harder for companies with private-equity or venture backers to qualify as small businesses because they can consider all firms controlled by a single investor as one entity.
Congress provided nearly $350 billion in loans for small businesses to cover payroll expenses over the coming months as wide swaths of the economy shut down to try to stem the spread of the novel coronavirus. The program, which is being administered by the Small Business Administration, is available only to firms with fewer than 500 employees.
In an interim rule posted Friday night, the SBA said companies seeking funding through the new lending program won’t be considered affiliates of other firms, as long as their investors don’t have the power to control more than 50% of the company’s voting shares.
The guidance creates an opening for some startups to access the loans, since many don’t have a single investor who owns over 50% of their shares.
But startups could be disqualified that have minority shareholders who, because of language in the company’s charter or bylaws, hold a veto on actions by the company’s board of directors. Some early investors in startups have negotiated such rights, according to lobbyists close to the industry.
Venture-backed firms had the support of powerful lawmakers such as House Speaker Nancy Pelosi (D., Calif.) and House Minority Leader Kevin McCarthy (R., Calif.), who urged the Trump administration to allow startups access to the emergency loans.
Sen. Marco Rubio (R., Fla.), one of the main authors of the small-business loan provisions, said on Twitter Saturday that he expected additional guidance on several remaining issues, including what are known as affiliation rules.
“In order for lenders to confidently participate, they need further clarity” on the affiliation rules, particularly for nonprofits, and on general eligibility requirements, Mr. Rubio said. “I expect that very early next week as well.”
STAY INFORMED
Get a coronavirus briefing six days a week, and a weekly Health newsletter once the crisis abates: Sign up here.
He also said strong demand for loans on the first day made clear Congress would need to provide more money for the program by late May.
The lending program got off to a bumpy start on Friday, just hours after the government released final guidance and application forms. Many lenders said they weren’t yet able to process applications given the quick turnaround, leaving many business owners discouraged as they sought funding to stay afloat in the coming weeks.
President Trump said Saturday on Twitter that he would ask Congress for more money for the small-business loan program if funds run out. He didn’t offer any more details.
—Catherine Lucey contributed to this article.
Write to Kate Davidson at kate.davidson@wsj.com and Dave Michaels at dave.michaels@wsj.com
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Business - Latest - Google News
April 04, 2020 at 10:58PM
https://ift.tt/2x1Y9Ft
More Startups Could Get Access to Federal Small Business Loans - The Wall Street Journal
Business - Latest - Google News
https://ift.tt/2Rx7A4Y
Bagikan Berita Ini
0 Response to "More Startups Could Get Access to Federal Small Business Loans - The Wall Street Journal"
Post a Comment