Representatives of Space firms and other different sectors in the industry have tried to persuade Treasury to do away with the rule that is disqualifying many startup businesses from acquiring Corona Virus relief programs.
Small businesses should have less than 500 workers and should not be owned by a large investment firm or a working capital company that has over 500 employees to be eligible for these loan programs. Several unions and legislators have been trying to waive off this rule so that struggling companies can access emergency aid. However, Treasury pushes the changing of this rule back because if it does allow it, this will change the aim of the Business Administration’s Loan Program, which was established to help separately owned small firms.
The essential loan in this program is the small business Paycheck Protection loan, which helps the startups to maintain their staff for about two months. This loan is payable after two years or not owed at all if the downsizing of the workforce is not done.
In an interview with SpaceNews, Jose Ocasio-Christian, the CEO of Caelus Partners, said that this loan program has brought up a predicament of whether small businesses and working capital firms should break their ties to qualify for the loans. He also said that the VC’s should look beyond the waiver and understand that to receive assistance from the government, they also have to give some help as well.
Jose continued saying that if a small business that is possessed by a large company gets help, then there is a possibility of scam because the company might be getting help already from the government through the CARES provisions. Therefore if the startup wants help, it has first to break ties with the company that owns it. The problem with this is that many startup companies do not wish to do it.
Large companies such as Boeing, which have been hit hardly by the COVID-19 pandemic, are receiving billions through this CARES ACT, and if Boeing funds the startup in terms of structure, then under the CARES ACT, it is counted as one of Boeing’s properties.
Christian later added that if a holding company is not ready to release a startup company to be independent, then the holding company should be in a position to help the startup company in case of any need. If there is a problem between the holding company and the startup company, then the startup company should get help from the national defense department or the government.
Jose concluded, saying that the lesson learned from this calamity is that they should now know how to invest in space companies to help them in case of a future disaster.