Private equity and venture capital firms want government money. But investment consulting firm Aksia says they need to think twice about any bailout capital.

The industries have lobbied for their portfolio companies to achieve eligibility under the new Small Business Administration program.

For now, the government has shut them out. The 500-employee rule notes tha affiliates fall under the direction of private equity or VC ownership. Industry lobbying groups like The Association for Corporate Growth and The American Investment Council are pushing for change. They want legislators and regulators to relax the rules to allow PE and VC funded companies to participate.

The National Law Review has been investigating the eligibility of the Alternative Investment Industry to participate in the Paycheck Protection Plan. They found that for this round of lending, portfolio companies cannot participate due to the affiliate rule. There is also a sense that lawmakers want the money to go to Main Street and not Wall Street.

Industry lobbyists are making the case that most of the businesses they own are on Main Street and employ millions of Americans.

Aksia Urges Caution

PE and VC might want to hesitate before applying for the next round of funding. Investment consulting firm Aksia LLC is a consultant to large institutional investors and pension funds for alternative investing. The firm is advising clients with $160 billion of alternative allocations. Aksia sent a letter to clients and fund managers warning that they will have a bad view of any private equity or VC firm taking PPP money.

The firm also said in the letter that any fund taking these funds “is not only showing poor moral judgment and potentially hurting the reputation of the alternatives industry, but is also probably crowding out struggling workers and businesses severely impacted by COVID-19.”

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