Associations Urge Treasury, Regulators to Expand Access to PPP

A diverse group of commercial and financial trade associations urged the Federal Reserve Board ("FRB") to provide guidance on the recently implemented Paycheck Protection Program ("PPP") and other lending facilities established under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The trade associations' letter to the U.S. Treasury Department, FRB and Small Business Administration ("SBA") cited a survey done by the U.S. Chamber of Commerce that found "almost one quarter of small businesses have reported having already temporarily shut down, and of those that haven't shut down, 40% report it is likely they will temporarily shut down in the next two weeks."

In the joint letter, the trade associations criticized the implementation of the CARES Act for:

• "narrowly appl[ying]" affiliation rule exceptions to only certain industries and as a result, leaving many small businesses and startups without access to necessary financial support; and

• harming small- and middle-market businesses by making certain businesses ineligible for loan guarantee assistance under the PPP due to their equity structure (i.e., angel investors, venture capital and private equity).

The associations recommended that, in order to make funding available to U.S. operating companies across each sector of the economy, (i) the FRB should issue additional guidance to allow small businesses with equity investors to receive critical funding under the PPP affiliation rules; and (ii) the SBA should review its affiliation rules to consider businesses that would "otherwise qualify as a small business" but are not currently included.