Negotiations on Relief Package Must Include Startup Voice
TLDR: Policymakers and Trump administration officials are holding discussions this week about the impending coronavirus relief package, but the lack of progress on a deal means that Americans and entrepreneurs are still waiting for much-needed support. As deliberations continue, lawmakers should consider a variety of proposals to strengthen currently available small business loan programs and pursue policies that will position startups and entrepreneurs to survive for the long-term.
What’s Happening This Week: Congressional Democrats and the Trump administration met yesterday to continue negotiations on the next coronavirus relief package, the so-called “Phase Four” of federal relief. Though the majority of Republicans, Democrats, and Trump administration officials support a new legislative package to bolster the U.S. economy amidst the ongoing COVID-19 outbreak, lawmakers remain far apart on a wide range of issues and are expected to continue holding negotiations for the foreseeable future.
Without an imminent deal, critical lifelines for startups and small businesses, such as Paycheck Protection Program (PPP) loans, are set to expire on August 8th. And while policymakers extended the deadline for small businesses to apply for PPP loans last month, the lack of action on a new deal means that businesses have no alternative options and must quickly move to secure funding if they need PPP loans to continue paying their employees—even if questions about the program’s loan forgiveness requirements, eligibility rules, and shifting guidelines remain unaddressed.
Why it Matters to Startups: With the House, Senate, and Trump administration at an impasse over the next coronavirus relief legislation, lawmakers should reevaluate the need for more targeted funding to support struggling businesses and startups. While many startups, entrepreneurs, and small businesses cannot wait for policymakers to engage in a drawn-out, politically-driven process, the startup community also cannot afford to be left out of the next relief package.
Startups that are less than one year old created more than three million jobs last year, and these businesses are important creators of future employment opportunities. If these startups do not receive the assistance they need to weather the pandemic, then policymakers will have to contend with a crippling wave of newly unemployed workers and the loss of future jobs.
As Sen. Marco Rubio (R-Fla.)—chairman of the Senate Small Business Committee—told reporters this week, if policymakers don’t support small businesses with additional PPP funding, “we’re going to have to deal with it through the unemployment-insurance system.” Despite the looming PPP loan deadline and ongoing negotiations on the Phase Four relief package, Sen. Rubio and Sen. Ben Cardin (D-Md.)—ranking member on the Senate Small Business Committee—both said lawmakers were in agreement “on many PPP measures.”
Any PPP loan agreement should address the issues that keep some startups from receiving assistance through the program. Policymakers can ease the program’s affiliation rule to allow venture capital-backed startups to qualify for needed funding. Congress can also reduce PPP’s payroll threshold from 60 percent to enable more startups and businesses to use the funding for other needed expenses. And lawmakers also have the opportunity to expand the scope of the program’s forgiveness requirements in order to allow startups to use the loans for their operating needs, such as for cloud computing services and marketing purposes.
Yesterday, more than 100 CEOs from some of the country’s largest companies—including Google, Salesforce, and Starbucks—wrote a letter to congressional leaders that asked them to provide long-term support to small businesses and startups by offering federally guaranteed loans beyond PPP, loan forgiveness eligibility, and support for minority entrepreneurs who traditionally have less access to capital than their white, male counterparts.
Engine has spoken with startups, entrepreneurs, and lawmakers over the past several months about a host of alternative policy proposals to further support the startup community in the Phase Four relief package. Many of these proposals—such as equity investments, forgivable loans, tax credits, and grants—mirror the steps proposed in the CEO letter. These additional relief options—including investor tax credits and R&D tax credits—would allow firms to bet on their long-term success by investing in the production and development of new and innovative technologies.
These approaches would support continued startup success, and ensure that entrepreneurs’ ideas are not sidelined by the COVID-19 pandemic. If policymakers want to ensure that the United States continues to lead other countries in technological innovation and development, then they need to ensure that the startup community receives the support it needs in the next relief package.
On the Horizon.
The Senate Commerce Committee is holding an oversight hearing tomorrow at 10 a.m. with the Federal Trade Commission’s five commissioners.
New America is holding a virtual discussion at 5 p.m. tomorrow about racial equity and technology.
The Federal Communications Commission is holding its monthly open commission hearing at 10:30 a.m. on Friday.
