Private-equity firms have been dealt a setback in their latest attempt to get companies they own access to billions of dollars of loans that the U.S. government is doling out to help small businesses hit hard by the coronavirus pandemic.
The next bill in the U.S. Senate doesn’t give the industry relief it has been seeking as lawmakers negotiate another round of economic stimulus, according to two people familiar with the matter who asked not to be named because the discussions are private.
Private equity has been lobbying aggressively in recent days to get Congress to clarify that portfolio companies controlled by the industry are eligible for the Small Business Administration loans.
The problem: In rules laid out by the SBA and the massive $2 trillion rescue bill that Congress passed last month, firms with more than 500 employees don’t qualify for the loans. That number counts affiliates –- a definition that could include the workers at all the portfolio companies that a private-equity firm invests in.
Senate Majority Leader
Democrats have outlined several demands for the pending legislation and so far have not sought the private equity changes.
Congress is expected to debate a wider stimulus package sometime after April 20 that will give private equity another chance to try access the program. In the meantime, lawmakers sympathetic to their complaints are trying to work with the administration on rules changes, said one of the two people.
The issue over how employees are counted is also affecting venture-capital firms, which have funded a number of tech startups. That has prompted industry executives to attempt to lobby House Speaker
But a potential stumbling block is the deep resentment Capitol Hill progressives have toward private equity. Senator
Private equity lobbyists have repeatedly said they are also holding discussions with the SBA and Treasury Department in the hope that those agencies will issue guidance clarifying that portfolio companies can obtain loans. But SBA officials told industry executives privately last month that buyout shops should use their own cash piles to bail out struggling businesses, according to people familiar with the matter.
In a sign of the lobbying heft, 10 trade groups, including the Club For Growth and Heritage Action for America, wrote a letter on Tuesday to Mnuchin and SBA Administrator
“We urge to use your authority to waive the SBA’s ‘affiliation’ rules that, without relief, will act as a direct regulatory barrier to job retention and creation at some of the most innovative and exciting companies in our economy,” the groups wrote in the letter. “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.”
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