Eshoo Leads 41 Members of Congress in Calling For Access To Federal Loans For Midsize Startups

Washington, D.C. – Today, Congresswoman Anna G. Eshoo led a bipartisan group of 41 Members of Congress in sending a letter to the Federal Reserve and Department of the Treasury urging them to modify the Main Street Lending Program to allow more startups and emerging businesses to participate in this program. The current formula calculates the size of these loans using the borrower’s earnings before interest, taxes, depreciation, and amortization (EBITDA), a measure that approximates a firm’s profitability, but excludes many emerging businesses with a negative EBITDA.

“Without changes to the Main Street Lending Program, many emerging midsize businesses will be ineligible for this program which could have devastating effects on the employees of many otherwise successful companies,” Rep. Eshoo and her colleagues wrote. “Lending to midsized startups does not pose a moral hazard or constitute a bailout because a negative EBITDA does not reflect on whether the business would have been viable had the pandemic never occurred. In fact, the Program’s current terms create a disincentive for firms to invest in growth in normal times since the federal government is effectively punishing such investments.”

The Members of Congress shared their concerns that EBITDA is a flawed measure of a business’s ability to repay loans. Many businesses in good financial standing have a negative EBITDA because they made investments before the pandemic that are vital to their long-term growth.

The text of the letter can be found HERE.

On March 27th Rep. Eshoo led a bipartisan letter to the Small Business Administration asking it to waive rules precluding startups from accessing support under the Program Protection Program (PPP), and she wrote to Congressional leadership on April 8th raising the same issue.

###