US agency says there are no emergency small business loans for hedge funds and private equity

BOSTON (Reuters) – Hedge funds and private equity firms are not eligible for types of U.S. government loans designed to relieve small businesses from the economic hardships of the coronavirus outbreak, the Small Business Administration said on Friday ( SBA).

“Hedge funds and private equity firms are primarily engaged in investing or speculating, and therefore these firms are not eligible to receive a Paycheck Protection Program (PPP) loan,” the SBA wrote in an update. day to clarify which companies can request relief under the program. .

The loans are designed to support small businesses ranging from hairdressers to restaurants to help cover employee payrolls and rent, as large swathes of the economy have been shut down to prevent the virus from spreading.

U.S. lawmakers on Thursday approved a new $ 484 billion aid bill, the fourth passed to address the coronavirus crisis to fund small businesses and hospitals. It includes $ 310 billion for PPP loans, replenishing the program’s recently depleted initial pot of $ 349 billion.

Reuters was unable to identify which firms allegedly requested or received the loans, but bankers and lawyers said there was speculation that some financial firms had applied for the program. Many Americans have expressed anger that government aid may go to these types of businesses, sometimes run by billionaire founders who fly in private planes and own second and third residences in vacation enclaves. exclusive.

Investment adviser Aksia LLC wrote a letter to the companies it has invested with on April 8 saying it believes “strongly that the cancellation of the PPP loan should not go to alternative asset managers” whose revenues commissions were not significantly affected by the COVID-19 crisis.

The SBA released the updated guidance on Friday, saying it “doesn’t think Congress intends these types of companies … to get a PPP.”

Granted, not all hedge funds and private equity firms are run by wealthy financiers and some struggle to stay in business as the historic stock market sell-off has hit returns and investors demand their payback. .

As the wave of criticism increased this week, a few publicly traded US companies, particularly in the hospitality industry, began to refuse the PPP loans they had just received. That accelerated after the Treasury Department said Thursday that state-owned companies would struggle to prove they needed the funds.

One company that turned down a PPP loan was Manning & Napier Inc MN.N, an investment firm but not a hedge fund manager. The company, which had $ 17 billion under management as of March 31, said Thursday it had “immediately canceled” its already approved requests for $ 6.7 million in PPP loans for two subsidiaries under new SBA guidelines .