Small Business Administration rule disqualifies many space startups from coronavirus relief loans - SpaceNews

Small Business Administration rule disqualifies many space startups from coronavirus relief loans - SpaceNews


Small Business Administration rule disqualifies many space startups from coronavirus relief loans - SpaceNews

Posted: 29 Apr 2020 04:37 PM PDT

The Commercial Spaceflight Federation and the SmallSat Alliance have asked the SBA to change how it defines a small business.

WASHINGTON — Industry groups representing space and other technology sectors are asking the U.S. government to change rules that make many startups ineligible to receive Small Business Administration loans to help pay workers during the coronavirus crisis.

The issue was raised in an April 29 letter sent to Treasury Secretary Steven Mnuchin, Office of Management and Budget acting director Russell Vought and the head of the Small Business Administration Jovita Carranza.

The letter was signed by two space industry groups — the Commercial Spaceflight Federation and the SmallSat Alliance — along with the App Association, Dcode and Financial Executives International.

The groups claim that hundreds of U.S. startups have been disqualified from loan programs — created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program — because of the way the SBA defines "small business."

Many startups are funded by venture capital firms that typically invest in a portfolio of companies. To be eligible for the SBA loan program a business has to have fewer than 500 employees. When defining a small business, the SBA applies an "affiliation rule," requiring companies to include in their worker count all the employees of companies with which they are "affiliated."

That rule requires venture-backed startups to aggregate the employees of all the unrelated companies in which their investors have equity positions, pushing many beyond the 500-employee threshold.

According to the industry groups, 98 percent of U.S. startups have fewer than 100 employees.

The letter warns that until the SBA issues a waiver to the "affiliation rule," thousands of workers nationwide will be laid off from startups. "Many of these companies support elements of our nation's critical infrastructure and need to be protected."

An industry source said the April 29 letter from the five trade groups follows several other letters sent by congressional leaders to the SBA and to Treasury over the past month on the same issue.

SBA limits business loans to small lenders - POLITICO

Posted: 29 Apr 2020 01:23 PM PDT

The change came as organizations representing thousands of large and small lenders nationwide urged the SBA to shore up its system for processing emergency small business loans or explain why it can't be done.

In a letter to SBA Administrator Jovita Carranza, nine bank and credit union groups said their members were having significant problems submitting loan applications to the SBA under the program.

"Quite simply, it is taking too long to submit loans and get these funds where they need to go," the groups including the American Bankers Association and the Credit Union National Association said. "We respectfully request that you help us resolve these access issues."

The show of force by the banking industry illustrated the tensions between the Trump administration and lenders over the implementation of the program. The effort relaunched Monday with $320 billion in new appropriations after its first round of funding ran dry April 16.

Since the program restarted Monday morning, lenders have complained they have struggled to input loan applications in the SBA's "E-Tran" system, which has been prone to glitches and crashes under the crushing demand.

In the letter to the SBA, the bank and credit union associations said the agency should be more transparent about the process and its limitations.

"If the pace and performance of the E-Tran system cannot be improved, then we ask that you share that information with the public to help manage expectations for all of the small businesses still counting on PPP for a lifeline," they said.

The SBA this week has disclosed some changes it has made to its systems to improve performance. On Tuesday, the agency told banks that they could no longer use automated bots to input loan applications, as it tried to bolster the program's stability.

The SBA declined to comment on the letter.

The groups that signed the letter included the Bank Policy Institute, Community Development Bankers Association, Consumer Bankers Association, Financial Services Forum, Mid-Size Bank Coalition of America, National Association of Federally-Insured Credit Unions and the National Bankers Association.

Small Business Administration temporarily limits stimulus loans to small lenders - UPI News

Posted: 29 Apr 2020 05:18 PM PDT

April 29 (UPI) -- The Small Business Administration briefly closed applications for emergency small business loans to all but the nation's smallest lenders on Wednesday.

SBA Administrator Jovita Carranza wrote on Twitter that the agency's systems would only accept applications for loans under the Paycheck Protection Program from lenders with less than $1 billion in assets from 4 p.m. EDT until 11:59 p.m. EDT.

Carranza said the restriction aimed to "assist small community lenders and ensure their small business customers have access" to the loans and that institutions with more than $1 billion will be able to submit loans outside of the timeframe.

The decision drew criticism for blocking out large banks also seeking to provide loans to small businesses under the program.

"With SBA blocking nearly 800 banks, relief for potentially thousands of small business owners and their employees will be delayed. A better solution would be a fully operational system that allows banks of all sizes to provide support to Main Street," former president and CEO of the Financial Services Forum, Kevin Fromer, said.

Paul Merski, group vice president for congressional relations at the Independent Community Bankers of America, praised the move for preventing loans from going to large businesses such as the NBA's Los Angeles Lakers which returned a $4.6 million loan on Monday.

"Frankly, allowing community banks under $1 billion is one of the best ways to ensure small mom-and-pop businesses get PP funding versus the LA Lakers," Merski said.

Congress established the PPP as part of the $2.2 trillion Coronavirus Air, Relief and Economic Security Act, providing $350 billion in loans to small businesses amid the COVID-19 pandemic. The program quickly ran out of funds only to be replenished with another $310 billion in a bill signed last week.

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