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The Deal Professor: Money and morals

Steven Davidoff Solomon, a.k.a. “The Deal Professor,” is the faculty director at the Berkeley Center for Law, Business and the Economy

In the competition for a federal bailout, venture capital won the first round. Now, private equity is fighting back — and winning.

The first round was the $350 billion Paycheck Protection Program, which provides forgivable loans of up to 2.5 times companies’ monthly payroll. The program is limited to businesses with no more than 500 employees, and it specifically excludes financial firms.

Businesses are flocking to the program, but the Small Business Administration initially barred most companies that are funded by venture and P.E. firms. The administration’s affiliate rule lumps together businesses with common controlling shareholders, so all of a firm’s majority-owned businesses count toward the employee limit. Private equity has lobbied vociferously for a waiver, but the government has not granted one.