One of the key criteria for accessing the Payroll Protection Program Loan is having less than 500 employees. Unfortunately, if your VC investor has certain control rights or owns more than 50% of the business, you may have to include employees of the VC fund and other portfolio companies. If this exceeds the 500-person cutoff, then you’re ineligible for a loan. 

You may need to include other portfolio company employees, if your investor —

• Owns more than 50% of the business

• Can prevent or block board actions

• Can approve or deny operational decisions such as 

  • Making changes to the budget

  • Employee compensation

  • Hiring/firing officers and executives

  • Creating or changing stock plans

• Board members that control the board and are not inside the company

• Stock options, convertible securities, and agreements to merge may be treated as if exercised. Please discuss with your lawyer.

Note: Your investors can waive these rights to make you eligible. Work with them to remove this roadblock.

There are still a lot of uncertainty in these items. It would be important to watch what groups such as NVCA are doing to get more clarity on how these loans will be applicable to venture capital based companies. We’ll be updating this page as more information becomes available and as everyone learns more.

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Last Updated — March 31, 2019