Chamber advocates for startups and small tech inclusion in the CARES Act

Posted on 04/01/2020 by Austin Chamber of Commerce

There is confusion in the tech start-up community about "whether they qualify for the small business loans made available in the massive stimulus package," and a new study warns that failure to waive existing Small Business Administration regulations known as “Affiliation Rules" could result in more than 1 million job losses, including 279,000 direct layoffs.

  • 1,000,000

    potential job losses due to Affiliation Rules

  • 279,000

    potential direct layoffs due to Affiliation Rules

The Austin Chamber recognizes the value the start-up and tech community has on our economy and has signed onto a letter with TechNet, urging inclusion for venture-backed startups in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The letter, signed by 132 groups representing 39 states, reads in part:

"We, the undersigned organizations representing America’s startup community, respectfully urge you to clarify as quickly as possible that small businesses with equity investors will not be excluded from the 7(a) loan program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act....

"The CARES Act takes many positive steps forward to provide relief to the U.S. economy. However, the goals of the program will be undermined if the 'Affiliation Rules' prevent many small companies with equity investment — as is the case with most startups — from qualifying for the emergency relief made available by the CARES Act....

"[A]llowing the rules to exclude some of our country’s most innovative startups in this new loan program is manifestly contrary to the intent of the legislation: to help small businesses keep their lights on and their employees working despite the double financial squeeze created by the economic and financial market downturns....

"In addition to laying off workers, startups will have to shut down critical research and development (R&D) projects in fields like bio-research, medical technology, and artificial intelligence, setting back our country’s competitiveness and delaying the creation of new tools to combat the COVID-19 pandemic. Bottom line: not providing this critical support to startups now will cause both short-term pain and long-term consequences that linger for years....

"In 2019 alone, 2.27 million jobs were created in the U.S. by startups across our nation. According to the job site Indeed, 98 percent of firms have fewer than 100 employees and between small and medium sized companies, they jointly employ 55 percent of employees. When implementing the CARES Act, we urge the SBA to issue guidance that makes clear affiliation rules do not arbitrarily exclude our most innovative startups."

Read the full letter

Related Categories: COVID-19 resources, Advocacy