SBA just released its new "affiliate rule" for the #CARESAct #PaycheckProtectionProgram & only made one change:

Faith-based organizations are exempt.

That's it.

Zero relief for Main Street & VC-backed firms.

Here's the full Interim Final Rule:
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https://home.treasury.gov/system/files/136/SBA%20IFR%202.pdf

SBA also released this two-page press release, which has no force of law and is easy to misinterpret. All it does is restate existing rules & statute.

Next up: a quick restatement of the restatement for non-lawyers...
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https://home.treasury.gov/system/files/136/Affiliation%20rules%20overview%20%28for%20public%29.pdf

(a) If you are a restaurant or hotel, a franchisee, or an SBIC-backed company, *no affiliation rules apply to you,* because Congress said so.

It doesn't matter if your parent company has a zillion employees; as long as your entity has <500 employees, you can get a #PPPloan.

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(b) If you are a faith-based organization, *no affiliation rules apply to you,* because the SBA just said so. Out of nowhere. At like 10pm on a Friday night.

It doesn't matter if you have a zillion employees; as long as any 1 entity has <500 employees, it can get a #PPPloan.
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(c) Any other business or nonprofit: *The old affiliation rules still apply to you, unchanged.*

That's what all this gobbledegook in the SBA press release really means. No change from the status quo pre- #CARESAct.

Why does this matter...?
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#PPPloans are only available to businesses & nonprofits w/ <500 employees.

But the SBA "affiliation rules" often count equity shareholders' employees toward that limit.

That's a huge problem if you're a small business with investment from a much bigger business.

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There's a *huge* number of small businesses with multiple equity owners, including *but not limited to* VC-backed startups.

>13% of all new companies are financed by friends & family other than the owner(s), far more than the percent of new companies financed by VC (<1%).

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That said, let's focus on VC-backed companies for a sec, because if they're frozen out of #PPPloans, it's an economic catastrophe.

@ITIFdc estimates 279,000 direct layoffs & >1 million indirect job losses.
8/ https://itif.org/publications/2020/03/31/how-sbas-affiliation-rules-venture-backed-firms-will-limit-effectiveness

Here's an excellent memo from @nvca laying bare why VCs & startups are panicking about the status quo affiliation rule that SBA apparently isn't planning to fix.

Thanks to obscure administrative case law, many startups won't be able to get #PPPloans.
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https://nvca.org/wp-content/uploads/2020/03/VC-SBA-Lending-and-Affiliation-Guidance-for-SBA-Loan-Programs.pdf