House Introduces New Legislation Allowing Startups To Access PPP Funding

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On May 8, 2020, Congresswomen Anna Enshoo and Cathy McMorris introduced the Caring for Startup Employees Act of 2020, a bipartisan piece of legislation aimed at granting more economic assistance to startup companies through the Paycheck Protection Program (PPP). Should this bill become law, it would dramatically increase the number of companies eligible for PPP loans.

Under current Small Business Administration (SBA) guidance and regulations—specifically the agency’s “affiliation rules”—many startups are unable to receive PPP funds because they do not have a majority shareholder. The Caring for Startup Employees Act of 2020 would waive such rules for startups while also preventing PPP funds from being used to pay investors. Instead, the aim is to give startups the financial assistance necessary to retain their employees during the COVID-19 pandemic. Since startups employ over two million Americans, enabling such businesses to access PPP funding would allow many to keep their jobs during this difficult time.

Congresswoman Eshoo has previously tried to waive “affiliation rules” for startups. On March 27, 2020, she sent a bipartisan letter to the SBA requesting such a waiver; on April 8, 2020, she sent a letter to congressional leaders to ask for the same.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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