Illustration: Sarah Grillo/Axios

The Senate late last night passed a $2.2 trillion safety net for the American people and American businesses. But not all businesses were included. The package left out thousands of small companies owned by private equity firms.

Details: The legislation includes $350 billion in small-business loans for companies with fewer than 500 employees. That's a liberalization of typical SBA rules, which are more industry-specific in terms of employee number and revenue.

Yes, but: One rule that still applies is that private equity-owned companies are considered "affiliated" with all of the private equity firm's other portfolio companies.

  • That means if you have 300 employees but are owned by a private equity firm whose portfolio companies employ a total of 1,000 people, you don't qualify.

The same goes if a VC firm controls over 50% of a startup's voting stock, or if two or more VC firms combined "are large compared to other stock holdings."

  • Also left out are all cannabis-related companies, as they've historically been blocked from participating in SBA programs.
  • It's possible that there will be more lenient guidance added to deal with these exemptions, but it wasn't in the 800-plus pages voted on last night.

The new bill does have exemptions for small businesses in the restaurant, restaurant supply chain and hospitality sectors — plus some carve-outs for SBIC-backed companies.

How it works: The bill asks Treasury to establish a middle-market lending program for companies with between 500 and 10,000 employees, which potentially could help larger PE-backed companies. This is part of the broader $454 billion direct lending pool.

  • All direct loans would include several conditions while the loan is outstanding, including employment retention requirements, no dividends or stock buybacks, and no forgiveness.
  • The bill language says Treasury will "endeavor" to create the middle-market program, which seems a bit wishy-washy.
  • We still do not know how companies would apply for such loans, or any specific qualifying requirements besides employee number (kind of like the Fed's still-amorphous Main Street lending program, announced earlier in the week).

The bottom line: Most American businesses, small and big, were helped last night. But a wide swath of smaller, private equity-backed companies — everything from manufacturers to services companies to software providers — were forgotten.

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