SBA Loan Implications For Portfolio Companies

On Sunday afternoon, March 22, 2020, the Senate failed to pass a key procedural vote required to advance the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), commonly referred to as Phase 3 of the federal government’s response to the coronavirus outbreak. As of Sunday evening, Senate Republicans were still working with Democratic leaders and the White House to reach a deal.

The proposed CARES Act is expected to, among other things, expand the Small Business Administration’s (SBA) loan program to any business with 500 employees or fewer. However, in calculating the 500 employee threshold, the SBA generally includes all employees of affiliated entities (for example, in general, the number of employees in any private equity fund’s portfolio company would be calculated by including employees in all other portfolio companies of such private equity fund).