The CARES Act (signed into law on March 27) created the Paycheck Protection Program (PPP), a $350 billion small business lending facility administered through the Small Business Administration (SBA). We believe this program is the most generous program for small businesses, as the loan turns into a grant for those who maintain payroll.
NVCA has been fighting for the ability of venture-backed startups to access the PPP, and we are working closely with the Small Business Administration (SBA) on affiliation guidance that will determine whether VC-backed companies are eligible for the lending facility. The key concern in the bill that we has was the affiliation rules challenge. We sent a letter to the Treasury Department and the Small Business Administration, urging them to take immediate action to ensure that small businesses with equity investors will not be excluded from the stimulus bill’s relief programs. You can read the letter here.
The Treasury Department and SBA recently released the loan application for the PPP. Unfortunately, this application was originally released without accompanying affiliation guidance clarifying whether startups can access the PPP. The application also required representations and certifications that were incongruent with the role of minority investors in companies. Therefore, NVCA sent a letter (which you can read here) to Treasury and SBA detailing our concerns and asking that affiliation guidance be issued and that changes be made to the PPP application process.
We also sent a letter to Treasury asking for clarity on the interaction between the tax provisions and the loan facility, which you can read here.
In recent days, important guidance about the Paycheck Protection Program (PPP) and affiliation rules has been put out by the Treasury Department and Small Business Administration. This guidance has provided helpful information regarding the obligations of venture-backed companies.
We are focused on helping our members and their portfolio companies understand PPP and, if appropriate, apply for the program. To that end, NVCA has worked with a team of attorneys to put together a step-by-step guide to the PPP and analysis of the applicable affiliation rules. Below you will find a memo that we hope helps you navigate PPP (updated April 9). Please share it with your portfolio companies as they explore PPP.
And in an effort to help VC-backed companies navigate this process, NVCA put out an earlier guidance document for how companies can navigate the SBA lending process and affiliation rules. Read that guidance here.