The U.S. Senate passed the largest stimulus package in American history on Wednesday to cushion the economy from impacts of the coronavirus pandemic. The legislation carves out special relief programs for small businesses, which have been rocked by the virus and wide-spread isolation orders compelling many Americans to avoid going out.
Though many aspects of how the legislation will impact startups remain unclear, the bill outlines which companies would be eligible for relief and what shape that help will take. We’ll update this page as more of the details are ironed out.
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Relief for startups: The legislation carves out $350 billion for small business loans to cover expenses for up to eight weeks. Qualifying companies can apply for loans up to $10 million with the Small Business Administration, according to the office of Maria Cantwell, a democrat from Washington who sits on the Senate’s Small Business Committee. Loaned funds spent on payroll, rent, or utilities could become grants that don’t need to be repaid if companies retain their current payroll.
A separate $27 billion will go toward relief and assistance for small businesses and nonprofits, Cantwell’s office said. Those funds include $10 billion for a new emergency grant program and $17 billion to cover all payments for new and existing loans with the federal Small Business Administration.
Which companies are covered? Companies with fewer than 500 employees are eligible for the small business loan program.
Which companies are left out? Many small businesses owned by private equity firms would not be eligible for the small business loan program, according to Axios. Small businesses with venture capital investors who control more than 50 percent of voting stock are also disqualified, as are cannabis-related companies. VC-backed startups may also be left out due to SBA “affiliation rules.” When assessing the headcount for an individual startup, SBA takes into account the collective number of employees from an investor’s portfolio.
The exception: Mid-sized companies may be able to participate in a separate lending program under a $454 billion direct loan pool. The loans would have conditions around employee retention, stock buybacks, and other activities.
Other benefits for business: The legislation earmarks $221 billion for a range of tax benefits for businesses, according to The Wall Street Journal.
Gig workers: The bill also extends unemployment insurance to gig workers and freelancers for the first time. Some $250 billion would cover the expanded unemployment benefits. Uber CEO Dara Khosrowshahi earlier this week asked the White House to protect drivers as part of the stimulus packages.
What’s next? The House plans to vote on the bill Friday though its leaders are considering how to conduct the vote while minimizing the risk of transmitting the virus. House Speaker Nancy Pelosi said Thursday that the bill “will pass with strong bipartisan support.”