Coronavirus Stimulus Bill Doesn’t Provide Relief to Thousands of Small Businesses

by | Apr 30, 2020


Michele Merrell

Stimulus efforts so far have provided a good start to help Americans get through the economic hardship caused by the coronavirus crisis, but they have also to this point overlooked more than 12,000 small businesses across the country — and more than 700 in Florida alone — that have investments from private equity firms. By disqualifying these small businesses from the Small Business Administration’s (SBA) Paycheck Protection Program, lawmakers put a key pillar of the economy at risk. Private equity helps to strengthen thousands of companies in Florida, from larger names like the Dollar General to small companies like National Dentex in Palm Beach, and our elected leaders must work together to help these small businesses.

As the economy continues to spiral from the coronavirus pandemic with unemployment claims now at a record high, thousands of small businesses are left unable to qualify and apply for stimulus relief from the SBA’s Paycheck Protection Program because they are affiliated with investors.

Due to the “affiliation rule,” a wide array of individual small businesses that have no connection to each other, besides having the same investor, are classified as one organization. But they are not one company; they are separate businesses. Yet they were shut out from financial relief provided for in the Paycheck Protection Program, leaving them without help from Washington to financially survive the continuing economic fallout of the coronavirus pandemic.

In other words, private equity-backed small businesses have so far been disqualified from critical funds over an incorrect standard. The purpose of past stimulus efforts was to help small businesses stay open and help workers keep their jobs. But Congress instead inadvertently picked winners and put private equity-backed small businesses at a major disadvantage, pushing many of them towards bankruptcy.

Private equity-supported small businesses and their employees are struggling right now — just like sole proprietorships and companies without investors. They are no different from other small businesses, also having bills to pay and families to feed. And they have had to take drastic measures to keep the lights on until the number of new cases has flattened and the economy finds its footing again.

Until then, millions of workers across the country should not be penalized and lose their livelihoods for working at small businesses that have investors. Private equity-backed businesses have added $1 trillion to the national economy, and support more than 500,000 jobs right here in Florida. But those workers and businesses that contribute to the country’s economic growth have so far been prevented from accessing financial relief through Congressional stimulus packages. And it isn’t only their employees who will pay the price, either: private equity investments play a critical role in funding pensions for public employees.

Senator Marco Rubio, Senator Rick Scott and Florida’s other legislative leaders can help Congress to restore a level playing field and help more small businesses retain their workers. Lawmakers can reform the rule that incorrectly lumps individual small businesses that have received investments from one private equity firm as a single organization. This rule change would allow them access to Congress’s financial relief packages, just like everyone else, helping them to protect more jobs and assist with our country’s economic recovery.

Thousands of Florida businesses and their workers are depending on Congress to reform this broken system. Thankfully, some leaders in Washington have heard their concerns. Senator Rubio has already said that he wants to increase aid to small businesses and I hope he ensures that private equity-supported small businesses also have access to that financial relief — which they in part helped pay for through their tax dollars and economic contributions — moving forward. Without a rule change, we may see more small businesses close and unemployment claims continue to rise.

Michele Merrell is a small business owner and President, Merrell Consulting Group.

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