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CORONAVIRUS : WHAT IS THE RESCUE PLAN FOR STARTUPS ?

COVID-19, Fundraising, Match

CORONAVIRUS : WHAT IS THE RESCUE PLAN FOR STARTUPS ?

In the United States, the US government’s bailout plan of $2 trillion will absorb the financial fallout from the coronavirus crisis. However, startups that have been able to raise funds from Venture Capital will not benefit from this aid.

These “saving packages”, proposed by the European and North American states, are not yet well defined and require clarification as to their availability, which will most likely be implemented when the health crisis will pass the witness to the already present financial crisis.
But the question is when? Apart from China, which is gradually resuming production, countries from all over the world remain paralyzed, and small and medium-sized companies will not necessarily have sufficient cash flow to absorb its losses.
Investment organizations and lobbies are pressing for more specificity on the implementation of these recovery plans.
Let’s take the case of the United States, which would propose “two solutions” for start-ups for the loans they could receive:
1. The SBA (Small Business Affiliation) uses the “First Affiliation” rule to determine eligibility for loans:
“SBA determines whether an entity qualifies as a small business concern by counting its receipts, employees, or other measures including those of all its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit.” It means that companies would have to calculate all the employees of other companies that their investors have borne which would be above the employee threshold defined by the SBA.
2. Economic Injury Disaster Loans (EIDL) , this loan is part of a $10 billion program, the CARES Act , also regulated by the SBA. However, this type of loan is eligible under the condition of providing a personal guarantee greater than $200,000.
The major problem with these two types of loans for startups with equity investors is whether they can access the program?
On the French side, the government has decided to set up a 4-billion-euro package to support the cash flow of French startups. Their objective is to preserve FrenchTech, which represents a pillar in job creation, economic growth and the development of solutions to fight against COVID19: teleconsultation, teleworking, delivery …
Cash loans are also guaranteed by the State: “up to twice the total payroll for France 2019, or, if higher, 25% of annual turnover as for other companies”.
As for Mexico City, the national emergency was declared on Monday March 30th by the Secretary of Health, forcing Mexican citizens to stay home until April 30. The government has not yet expressed itself about the Mexican entrepreneurial ecosystem. As a reminder, the government of López-Obrador abolished the INADEM in 2018, an organization that supports entrepreneurs in the launch of their project.
The lack of visibility of this crisis, of clarity from the government on the eligibility of access to recovery plans … do not allow startups to have a tangible solution in the short-medium term to survive this crisis even though they are pillars in the economies of each countries and actors of the resolution of this crisis with their innovation.
An envelope of public money is not a solution on the medium to long term.
Therefore Novahub Center acts as an international business accelerator. Our objective is to support startups in this crisis by offering them for free a commercial service tailored to their needs and the solution it offers. We put you in contact with corporates, ventures or public organizations in order to be able to solve the challenges of this crisis.
We are also developing a new service designed for the world of innovation and adapted to the needs and dispositions of Startups, Ventures and Corporations. To be continued…
Let’s federate innovation together

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