U.S. Senator Kirsten Gillibrand called on the Small Business Administration (SBA) to aid small businesses with Employee Stock Ownership Plans (referred to as ESOPs) by expanding their eligibility for receiving SBA relief loans in the wake of the COVID-19 crisis. Small businesses across the country are struggling to respond to the COVID-19 crisis that has required many to cut back services or close their doors. Now, due to their unique ownership structure, ESOPs are having difficulty applying and receiving relief loans. In a letter, Senator Gillibrand urged the SBA to facilitate access to loans through the Preferred Lending Program and eliminate the investor equity injection requirement for ESOP loans.
“As the country braces for the full impact of COVID-19, ESOPs may not be able to survive this disaster if they are unable to receive federal aid,” said Senator Gillibrand. “Small businesses need urgent assistance to prepare and respond to the economic crisis caused by this pandemic. In this critical time, I urge the SBA to facilitate access to relief loans and eliminate lending delays and eligibility restrictions for ESOPs.”
Following Gillibrand’s push, Democrats secured expanded eligibility for access to Economic Injury Disaster Loans (EIDL) to include ESOPs, Tribal businesses, and cooperatives in The CARES Act (Sec. 1110), phase three of the coronavirus emergency package.
The full letter can be found here and below.
March 22, 2020
The Honorable Jovita Carranza
Small Business Administration
409 3rd Street SW
Washington, DC 20416
Dear Ms. Carranza,
I write to firstly to express my gratitude at the important work the Small Business Administration is doing to help our local businesses impacted during the COVID-19 health crisis, but to also ensure all small businesses are able to benefit from this relief. Small businesses who have Employee Stock Ownership Plans (ESOP) are finding it difficult to access loans from the SBA, especially during this time of economic downturn, as they are required to apply to the central SBA instead of through the Preferred Lending Program (PLP). This causes major delays in lending, instead of the more streamlined PLP. After passage of the FY19 National Defense Authorization Act, it was our intention that these businesses would be eligible for the SBA 7(a) programs even though their unique ownership structure makes it impossible to have a single 10% equity injection for these loans.
As the country braces for the full impact COVID-19 will have on our future, ESOPs may not be able to survive this disaster if they are unable to receive federal aid. I am asking today for your urgent assistance as our nation’s small businesses prepare to respond to the coming economic crisis that will unfold from the COVID-19 pandemic. Small businesses will be better equipped to withstand the economic downturn by:
- Making ESOP loans through the SBA 7(a) program immediately available through the Preferred Lending Program; and,
- Eliminating the 10% investor equity injection requirement for ESOP loans.
These measures can help keep our businesses afloat as their income declines due to a reduction in customers or forced closures.
I urge you to consider all small businesses, traditionally operated or ESOP, as you begin economic stimulus measures to cushion the effects of COVID-19 on our economy.