With Congress poised to act on new aid package for businesses, groups ask SBA to fix “donut hole”

by | Apr 21, 2020

The $2 trillion CARES Act passed by Congress and signed by President Trump earlier this month was intended to aid businesses threatened by losses due to the coronavirus outbreak. The idea was to inject cash into these businesses to enable them to retain their employees and sustain operations through what many hope will be just a temporary downturn. But under the current qualification rules, which discriminate based on the type of business structure, many small businesses and startups that are operating on investment capital and might conceivably employ a large number of people if they can survive the downturn, are currently ineligible for the funds.

Startup companies, which usually operate in the red when first launched, are particularly sensitive to sudden changes in the economy. If Congress does not waive the investment restriction, those rules will act as a direct regulatory barrier to job retention and creation at some of the most exciting new companies in Florida and around the nation. An entire generation of innovative businesses could be killed off because of antiquated rules enforced by the Small Business Administration. 

In a letter sent to the Trump Administration and the SBA, a broad coalition of advocacy groups are pushing for a fix to the problem, pointing out that many businesses, irrespective of ownership structure, have been impacted by COVID-1. Failing to include investor-backed businesses could threaten tens of thousands of jobs – many of those based in Florida.

The letter urges the SBA to waive affiliation rules in its final rule and asks Congress to permanently reform SBA’s affiliation rules in the next piece of legislation related to COVID-19.

The signing organizations, representing millions of taxpayers and consumers, applauded the Trump Administration’s efforts to eliminate unnecessary regulations that kill jobs, stifle investment, and slow economic growth, while pointing out that the arbitrary limitations on relief inject a political element to the implementation of the bipartisan CARES Act. From the letter:

Unlike the Interim Final Rule recently proposed by the SBA, we believe that affiliation rules should be waived for all businesses in the SBA’s final rule in order to ensure a level playing field. We also urge Congress to permanently reform SBA’s affiliation rules in the next piece of legislation related to COVID-19.

More generally, we urge you to reject calls to discriminate against investor-backed businesses through the PPP and the Exchange Stabilization Fund (ESF). Make no mistake: some are using the crisis of COVID-19 to punish investors and private businesses that they do not like for political purposes.

The full text of the letter is available here.



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