Millions of Americans Were Left Out in Stimulus Package

April 14, 2020

By Peter Feaman

In response to the coronavirus pandemic, Congress passed the largest stimulus bill in history. The CARES Act pumped over $2 trillion into the economy and was intended, among other aims, to support small businesses and their employees. However, this bill had one significant blind spot: it provided no financial relief for the millions of Americans who work for small businesses that receive funding from private equity groups.

These businesses constitute a significant share of the economy. In 2018, private equity-backed businesses generated $1 trillion for the economy and employed nearly nine million Americans. And many of these companies are the small businesses that will be most affected by this current crisis.

There are more than 12,000 small businesses nationwide which are supported by private equity. In the state of Florida alone, there are over 700 private equity-backed businesses, together employing more than half a million Floridian workers. For companies that are not traded on the stock market, private equity investment is often the best way to access capital.

However, these businesses are not allowed to receive a cent of federal stimulus money. This comes about as a direct consequence of what is known as the “affiliation rule,” which stipulates that multiple companies owned by one investor are fallaciously labeled as a single entity, and therefore most small businesses in a private equity firm’s portfolio of investments do not qualify for stimulus funds through the Small Business Administration's Paycheck Protection Program. In practice, this rule means that a large subsection of the economy will now have to weather the current epidemic alone, jeopardizing the financial security of many workers and small businesses.

While the term “private equity” may bring to mind images of Wall Street, the businesses supported by private equity firms, and their employees, can be found all along Main Street. The fact that they have investors, including public employee pensions, does not make them fundamentally different from any other sort of business or sole proprietorship. These business owners and employees are real people who have made real and significant contributions to our economic growth, and they will suffer badly if they do not have access to federal relief.

Fortunately, there is something that can be done about all of this. Our policymakers can push to change the affiliation rule, allowing businesses that receive private equity investments to be eligible for the same federal aid as all other businesses. Repealing this unfair and arbitrary standard will directly help hundreds of thousands of Floridians—but that isn’t all. Because these businesses play such a vital role in the economy, it will indirectly help all 21 million residents of the Sunshine State.

It is important to remember that businesses with private equity investors are not asking for any special treatment. They are simply asking for the same opportunities as all other businesses facing this crisis. We are all in a difficult position because of the coronavirus epidemic. There is no reason why some people should be denied aid and penalized based on how their business is structured. The CARES Act was intended to protect jobs, and relaxing the affiliation rule will help it more effectively serve that purpose.

We do not know how soon we will be able to beat coronavirus. Legislation cannot end that, but it can help provide a measure of economic certainty in this frightening period. At the very least, many of our state’s small business owners and employees will be able to go to bed with the knowledge that they can provide food for their families. It is difficult to imagine a better step that our leaders in Florida, like Senator Marco Rubio, Senator Rick Scott, and Governor Ron DeSantis, can take than to change the affiliation rule. Millions of Floridians will thank them.

Peter Feaman currently serves as the Republican National Committeeman for Florida. Feaman is an attorney and the owner and President of Peter M. Feaman, P.A. in Boynton Beach, FL. Most recently, Feaman was appointed by Senator Marco Rubio to the Federal Judicial Nominating Commission for the Southern District of Florida in 2017.

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