Advocates are warning startups they may have to give back SBA loans - Business Insider

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Startup advocates worry venture-backed companies that got money under the $670 billion small-business loan program are going to have to give it back

all acknowledged getting loans under the initiative. Many such companies have since promised to return the money.

When companies determined whether they need the loans, they now need to consider, as part of the new rules, whether they have access to other sources of capital, including from their investors or owners or the public stock markets and can use that money to support their operations in a way "that is not significantly detrimental to the business.

The SBA "inserted a new standard changing the rules of the game after the players have left the field, and then everyone was sort of scrambling to figure out what does that mean and how do I reassess," Zimmerman said.Under the new rules, companies that return the money they received under the program by May 7 won't be held liable for making a false certification about their need for the loans. Some startups are already refunding the money or are being advised to do so.

The problem for startups that took the loans is that many of them have already spent some of the money they received, said Zimmerman. Many have also made assurances to employees that they won't be laid off or to landlords that they'll be paid, thanks to those loans, he said.

 

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