Venture capital-backed startups will become eligible for $350 billion in small business loans guaranteed by the federal government, House Minority Leader Kevin McCarthy (R-Calif.) told the Axios Pro Rata Podcast on Thursday: "I just got off the phone with Treasury Secretary Mnuchin and this is going to be solved."
In context: The Paycheck Protection Program, which provides forgivable loans of up to $10 million for companies with fewer than 500 employees, was included in the $2 trillion stimulus plan passed last week. But it also maintained something called the "affiliation rule" for most applicants, which likely excluded many small businesses that count venture capitalists among their shareholders.
- McCarthy and House Speaker Nancy Pelosi (D-Calif.) have in recent days pushed for the Treasury Department to issue guidance easing the affiliation rule.
- McCarthy says that in the next day or two, Treasury will release guidance that sets a simple guideline for PPP loan eligibility.
- If a small business is not controlled by a single outside shareholder, it would be eligible.
Between the lines: This does leave out possibly thousands of private equity-owned small businesses. McCarthy says there could be future efforts, or maybe even a subsequent piece of legislation, to address such companies, but for now he and Mnuchin agreed that "control" is the simplest and fairest way to determine eligibility.