House Minority Leader Kevin McCarthy says VC-backed startups will become eligible for $350B in small business loans guaranteed via the CARES Act
In a world that everything counts, everybody matters Tweets: Biz Carson / @bizcarson : This week @ShakeelHashim asked the simple question: should the government bail out startups? Why not VCs? The simple answer is: investors can't save all the jobs. But the CARES act could save some of them. Inside how VC firms are responding: https://www.protocol.com/... Rep. Ro Khanna / @reprokhanna : As @SpeakerPelosi & I wrote to Treasury/@SBAgov, these loans will save 1000s of tech jobs amidst COVID-19, and secure our lead in science, tech and innovation. Promising to hear, but we have to ensure startups aren't excluded from the largest economic relief bill in US history. https://twitter.com/... @__anoop : Founders who take advantage of this(correctly so) but still pull a Bird on their rank & file need to dragged asap https://twitter.com/... Arsalan Arif / @akaarsalan : GTFO. My parents, who run small business that need to make payroll with actual revenues, have to compete with VC-backed startups for this? This is wrong. https://twitter.com/... @saltcreekgbr : Lol can't afford checks for all Americans but fitbit and Uber can get bailouts https://twitter.com/... Dan Primack / @danprimack : BREAKING: @GOPLeader tells @Axios Pro Rata Podcast that Treasury Dept likely will issue guidance so that VC-backed startups ARE ELIGIBLE for small biz loans via the CARE Act. Dividing line will be “control,” so PE-owned cos still excluded.
Context & Ripple Effects
This lands mid-fight over who counts as a 'small business' in the CARES Act. After tech trade groups and congressional leaders lobbied the administration not to exclude venture-backed companies from the $350B loan pool, Ro Khanna laid out the case for startup eligibility in a Q&A on COVID-19's hit to the tech industry, arguing the loans would save thousands of tech jobs.
McCarthy's statement is the highest-ranking Republican endorsement yet of that position — notable because it frames VC-backed firms as job preservers rather than as companies whose investors should absorb losses first.
First-order effects
- VC-backed startups gain a path to SBA-guaranteed loans they were previously presumed locked out of, shifting some survival math away from bridge rounds and toward federal credit.
- Treasury and the SBA must translate McCarthy's pledge into actual eligibility rules — the burden moves from lobbying to rule-writing at the agencies.
Second-order effects
- Traditional SMBs now compete for the same $350B pool against equity-funded startups, sharpening the fairness fight over what 'small business' means in the program.
- Lenders decide whether underwriting standards built for Main Street borrowers can process startups with no profits and venture cap tables — a friction point that determines whether eligibility is real or nominal.
Third-order effects
- The SBA's subsequent guidance still seemed to exclude most VC-backed startups (new program rules issued days later), suggesting the gap between political promises and administrative definitions becomes the durable battleground.
- If emergency programs keep reaching into the venture ecosystem, each crisis normalizes public backstops for private-capital-backed firms — while the later Blueacorn PPP fraud findings show how disbursement-at-scale invites abuse when eligibility lines blur.
The trend: Crisis-era stimulus is being pulled into tech's capital structure, with eligibility definitions — not appropriations — becoming the decisive fight over whether Washington backstops venture-backed companies.