Stimulus Funds Cannot Prevent Businesses from Going Broke
The coronavirus pandemic has wreaked havoc on the nation’s business community. With nearly every state issuing stay-at-home orders and limiting indoor gatherings, a host of industries have been pushed to the brink. Congress tried to help businesses by creating the Paycheck Protection Program, called PPP. This program provided loans to small businesses to cover the cost of payroll for a couple months, as well as other costs. If businesses followed certain guidelines, then 100% of the loan would be forgiven.
At Nowack & Olson, PLLC we help family and small businesses determine whether to file for bankruptcy. If you would like to discuss your options, please call us today.
PPP Could Not Save Hundreds of Businesses
According to a report published by the Wall Street Journal, nearly 300 companies that received PPP loans have ultimately filed for bankruptcy protection. These businesses received in total somewhere between $228 million and $509 million in loans. Overall, the Small Business Administration has made $525 billion in loans to more than 5.2 million companies.
Collectively, the companies that filed for bankruptcy protection employed over 23,000 employees and were located around the country. Based on interviews, many businesses simply could not survive the pandemic, which as of November 2020 shows no signs of slowing in many regions of the country.
One company that recently filed was Florida-based gym Youfit, which had 85 gyms in several states. According to court filings, the company had $50-100 million in assets and liabilities of $100-500 million. The company filed for Chapter 11 protection despite receiving a large PPP loan, totaling $10 million.
Of course, more than 300 businesses might have closed because of the pandemic. Not every company that goes under files for bankruptcy protection. Instead, they simply liquidate by selling their assets and then settling with creditors. If creditors are owed money, they can sue, but that is like getting water from a stone. Unless a business owner is personally liable for debts, liquidation might be easier than bankruptcy.
Bankruptcy or Liquidation: Which is Right for Your Business?
If your small business is hurting, contact an experienced business bankruptcy lawyer. Filing for bankruptcy protection is not appropriate for all businesses, but we can thoroughly review your options with you.
For example, if you hope to continue your business, then a Chapter 11 reorganization might be in order. Congress has recently made this bankruptcy appealing to small businesses by streamlining the requirements, saving businesses time and money. Alternately, you might want to file for Chapter 7 protection during liquidation.
Those businesses that took out PPP loans should discuss how those loans will be handled in bankruptcy. Generally, smaller loans did not require posting collateral, so there is nothing for the bank to seize. However, discharging the loan in bankruptcy is not guaranteed. Businesses that received large loans might have had to agree that owners would be personally liable.
Contact Nowack & Olson Today
Deciding to close a business is never easy. Those who want to continue to operate as they reorganize debt also should obtain legal counsel. Call our Plantation bankruptcy attorneys today at Nowack & Olson, PLLC at 888-813-4737 to schedule a meeting.