Private fund limited partners push for small business loans

As federal regulators come up with the rules implementing the CARES Act economic stimulus package, a limited partners advocacy group is urging them to make sure that portfolio companies can access loans available to keep workers employed.

One part of the act committed $349 billion more for loans guaranteed by the Small Business Administration to help firms with 500 or fewer employees at one location, but there is "a significant limitation" on companies owned by private equity or venture capital funds, Institutional Limited Partners Association CEO Steven Nelson said in a Tuesday letter to Treasury and SBA officials.

SBA affiliation rules "could effectively aggregate the 500-employee threshold across the entirety of the fund's portfolio, even though these businesses are distinctly separate entities," Mr. Nelson wrote. ILPA is calling on regulators to allow the portfolio companies to be considered unaffiliated or at least allow the funds to convert to eligible companies quickly.

ILPA members have as much as $1 trillion invested in small businesses, "whether they are individual businesses or those that happen to be owned as a portfolio company," he said. Not making them eligible "will likely result in significant harm not only to employees ... but also significantly reduced returns to the institutions providing retirement security through pensions, insurance policies and other investments that serve hundreds of thousands of Americans."

Employers of all sizes affected by the COVID-19 crisis are eligible for new tax credits for employee wages, although there are some limits for companies with more than 100 full-time workers.