Rep. Phillips pushes for CARES Act fix and New Business Preservation Act to shield startups
WASHINGTON, D.C. — Congressman Dean Phillips is working to strengthen and protect the country’s start-up businesses with a pair of legislative fixes designed to provide relief for new businesses across the country.
Today, Phillips released a bipartisan letter signed by 54 of his colleagues calling on the Small Businesses Administration to update the definition of “small business” to include many of the country’s start-ups so that these companies can access relief included in $2.2 trillion CARES Act signed by President Trump last week. The SBA’s policy as written would exclude many of the nation’s startups from accessing the $350 billion small business loan program, which will lead to dire consequences for businesses across the country that are struggling along with the rest of the economy.
“We are being forced to significantly reduce our spending and extend cash runway to preserve the future of the company,” said Mike Kujak, President and CEO of Francis Medical, based in Maple Grove, Minn. “This language as written needs to be resolved immediately or companies like ours will be forced to furlough employees or take other drastic measures just to stay afloat.”
The letter is part of a number of efforts led by Rep. Phillips to lend a helping to hand to startups and other small businesses across the country, including his newest piece of legislation, the New Business Preservation Act.
The bill, cosponsored by Reps. Terri Sewell, Tim Ryan and Ro Khanna, would create a new $2 billion program at the Treasury Department that will partner with states to invest in promising new businesses alongside private investors in areas of the country that do not currently attract significant equity investment. Special consideration will be given to women- and minority-owned businesses, who face additional barriers in accessing investment capital. This bill is a companion piece to legislation led by Minnesota Senator Amy Klobuchar.
“While the $2.2 trillion CARES Act relief package will be a life raft to many small businesses, it leaves many of our nation’s startups high and dry,” Phillips said. “Research has repeatedly shown that new businesses account for a disproportionate share of innovation, economic growth, and job creation –and, therefore, are absolutely critical to the nation’s ability to weather and recover from the economic blow inflicted by the coronavirus emergency.”
The economic effects of the coronavirus pandemic are expected to disproportionately harm new businesses, which tend to have less cash on hand and are often poorly positioned to weather a drop-off in customer demand and lender financing. Equity financing – which the bill provides – is critical because it does not require repayment but instead represents a long-term investment in the business. A significant reduction in the number of new businesses in our economy would have a devastating impact on job openings since research has shown that these new businesses are the source of most new job creation.
The New Business Preservation Act is supported by the Progressive Policy Institute, Third Way, Small Business Majority, Center for American Entrepreneurship, Economic Innovation Group, Small Business and Entrepreneurship Council, the National Association of Investment Companies, and the Information Technology and Innovation Foundation.
The New Business Preservation Act would:
- Create a program at the Treasury Department that will partner with states to invest alongside private venture capital companies in new, high-potential businesses.
- Increase the geographic diversification of equity investment, with the goal of driving economic growth and job creation in regions of the country that are currently under-resourced
- Operate as a self-sustaining fund, with any returns on investment being reinvested in new businesses in future years.