Why is there so much confusion regarding whether venture capital-backed startups are eligible for SBA Section 7(a) loans under the Paycheck Protection Program (the PPP)? The confusion has largely stemmed from three things:

(1) the “Affiliation Rules”

(2) a widely shared misreading of which Affiliation Rule applied (see last week’s Forbes article on Section 301(f) vs. Section 103, which we’ll call the “Forbes Section 301(f) Article”), and

(3) the lack of clarity around protective provisions, which are veto rights found in a startup’s charter or other documents.

Let’s tackle these one at a time, starting with an introduction to the affiliation rules, then moving to the Treasury Department’s confirmatory guidance (issued within the last 24 hours), followed by diving into how to address “Protective Provisions.”

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