Congressman Gonzalez Joins Hispanic Caucus Letter to Protect Minority-Owned Small Businesses

WASHINGTON — Congressman Vicente Gonzalez (TX-15) joined members of the Congressional Hispanic Caucus (CHC) to send a letter to Secretary Mnuchin of the Department of the Treasury and Administrator Carranza of the Small Business Administration urging that affiliation rules not be changed to allow large private equity firms to gain access to CARES Act funding intended for small businesses. This action is in response to possible attempts by large private equity firms to find and exploit loopholes in the CARES Act and subsequent legislation.

"Minority-owned businesses are being disproportionately impacted by the COVID-19 pandemic," said Congressman Gonzalez. "We have a responsibility to make sure everyone impacted by this crisis is made whole. I will to speak loudly and ensure that minority voices are heard."

"Small businesses are the economic engine of this country and it is essential that we protect them by ensuring large private equity firms are not taking away any relief intended for their recovery during the COVID-19 pandemic" the Members wrote. "Our minority small business owners and their employees are depending on this funding and we must do what we can to protect Latino, black and LGBTQ communities, especially during this great time of need."

Full text of the letter follows and can be foundhere.

Dear Secretary Mnuchin and Administrator Carranza:

We are writing to express our concern that large private equity firms are looking for loopholes in the Coronavirus Aid, Relief, and Economic Security (CARES) Act to gain access to funding that is intended to be set aside for small businesses and their employees. This is especially important to communities of color and other vulnerable communities since the latest data shows that COVID-19 is impacting Latino, black and LGBTQ communities at significantly higher rates.[1][2]Diverting any federal assistance from small businesses, especially those in more vulnerable and socio-economic disadvantaged communities, to line the pockets of private equity is unacceptable. Therefore, we urge your full and fair consideration of refusing to change SBA affiliation rules for private equity firms and barring any federal bailout for bonds that had junk status as of March 1, 2020.

The CARES Act provided an initial $349 billion for the creation of the Paycheck Protection Program (PPP) to cover payroll costs during the COVID-19 pandemic. Due to limited federal funds and extremely high demand, funding for PPP quickly ran out, creating pressure for small businesses to lay off employees. Layoffs due to COVID-19 are impacting Latino and black families at higher rates, with nearly 61% of Latino households and 44% of black households reporting a pay cut or job loss.[3]

We must ensure that our vulnerable small businesses, not large private equity firms, are able to fully access this relief. To accomplish this, we urge your full and fair consideration of these protections as you continue to implement the relief programs:

SBA Affiliation Rules: Eligibility for loan forgiveness provisions in PPP is reserved for small businesses with 500 or fewer employees. Various reports indicate that private equity firms are looking to change the "affiliate" rules to have access to federal funds for portfolio companies they've bought or leveraged. These funds are intended to be available for legitimate small businesses and their employees and should not be accessible to large private equity firms. However, if an exception to the "affiliate" rule is considered, it should be limited to authentic small business venture capital start-ups and observe strict limits on the use of federal funds for dividends and stock buybacks.

Limited Federal Bailout: Non-investment grade bonds, also known as junk bonds, are high risk bonds and have been typically issued by private equity firms when buying companies. This category of bonds should not be accessible for federal government bailout and we ask that you bar any federal bailout for bonds that had junk status as of March 1, 2020.

Small businesses are the economic engine of this country and it is essential that we protect them by ensuring large private equity firms are not taking away any relief intended for their recovery during the COVID-19 pandemic.

Our minority small business owners and their employees are depending on this funding and we must do what we can to protect Latino, black and LGBTQ communities, especially during this great time of need. That is why we urge your full and fair consideration of refusing to change SBA affiliation rules for private equity firms and barring any federal bailout for bonds that had junk status as of March 1, 2020.We appreciate your time and consideration of this important issue.