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Illustration: Sarah Grillo/Axios

With the Paycheck Protection Program (PPP) portal expected to reopen Monday, the Small Business Administration has explicitly prohibited "hedge funds and private equity firms" from receiving loans, and it also reaffirmed "affiliation" rules for private equity-owned companies.

Wait, what? Yes, there have been anecdotal reports of alternative investment firms at least inquiring about PPP loan eligibility. It's unclear if any such loans were made.

  • Most alternative investment firms have fewer than 500 employees, but the economic harm argument is tougher. Hedge funds might claim that they've experienced accelerated redemptions, thus reducing management fee flow, while private equity firms might point to LP defaults.
  • SBA used some imprecise language here, referring to hedge funds and private equity firms, but lawyers I spoke with don't think lenders will approve applications from PE firms at the fund or management company levels.
  • The bigger issue is that PPP loans operate under something called Section 7(a), which generally prohibits businesses that are primarily engaged in investment or speculation. SBA could have waived those guidelines for PPP — as it's done for businesses that generate revenue via legal gambling — but it didn't.

The bottom line: Alternative investment firms (or funds) were always edge cases for PPP loans, and now they've been thrown over that edge.

Note: Axios qualified for a loan under this program. More details here.

Go deeper

Updated Nov 20, 2020 - Health

The states where face coverings are mandatory

Data: Compiled by Axios; Map: Danielle Alberti/Axios

New Hampshire on Friday became the latest state to implement a mask mandate to fight COVID-19, amid a steep spike in cases across the country.

The big picture: States are reintroducing mitigation efforts like closing businesses and advising people to stay home as the U.S. averages the most daily cases of any point in the pandemic.

Republicans push to expand small business loan program

Senators Marco Rubio and Susan Collins. Photo: Bill Clark/CQ-Roll Call via Getty Images

Sens. Marco Rubio (R-Fla.) and Susan Collins (R-Maine) on Tuesday filed two big amendments to legislation introduced last week that would extend the deadline to apply for Paycheck Protection Program loans and permit some recipients to apply for new PPP loans.

Why it matters: The current program expires on Saturday, despite more than $100 billion left over from the CARES Act.

Aug 4, 2020 - Health

Local governments go to war over schools

A protester during a demonstration in NYC. Photo: Ron Adar/SOPA Images/LightRocket via Getty Images

The next big coronavirus battleground will be over who has the final say on whether schools can stay open.

Why it matters: This involves the safety of young children and their parents, not to mention older educators and staff, and comes at the same time as many of the parents are out of work.