In an attempt to sustain the U.S. economy after shelter-in-place orders were issued throughout the United States, Congress promulgated the CARES Act. While the primary goal of the CARES Act is to make funds available to individuals and companies affected by the closing of businesses that are non-essential, the CARES Act funds have not been supporting companies that were already in a Chapter 11 Bankruptcy. However, the CARES Act does provide that some Chapter 13 cases may be extended from 5 years to 7 years. In addition, the CARES Act amended the credit limit for businesses that want to file a Chapter 11 reorganization under the Small Business Reorganization Act to $7.5M allowing larger businesses to avail themselves of the benefits of the Small Business Bankruptcy provisions. These amendments to the Bankruptcy Code will terminate at the end of this calendar year.
An Action Plan for Your Business’s Financial Implications
- Business Impact: The financial repercussions from COVID-19-related economic downturn will be far-reaching and pervasive, including revenue shortfalls, increased expenses, and tighter credit and capital markets
- Time is of the Essence: Opportunities businesses to be proactive in today’s financial climate will evaporate as the crisis broadens and deepens across our economy
- Act Now: Now is the time for action. Whether or not your business is open. Whether or not you have cash saved for a rainy day. Everyone needs to evaluate their financial situation and needs to begin planning for the unknown we will experience during these unchartered times
How to Prepare to Move Forward
- Private Markets & Government Programs: It is important for businesses to take advantage of any opportunities that are available, from private markets to government programs. Federal and State governments are creating programs for businesses of all sizes. Financial institutions and other lenders and creditors have flexibility in the early phases of a financial downturn. They will have less flexibility as the downturn deepens
- Changing Rules: The rules and laws issued by the Department of Labor and other governmental entities are changing regularly and clients need to keep up with these changes to ensure that their businesses do not end up on the wrong side of these changes
Uniquely Positioned to Assist Small- and Medium-Sized Businesses
- In- and Out-of-court Restructurings: KPPB LAW has extensive experience advising clients through economic turmoil. We represented dozens of clients during and after the 2008 financial crisis in and out of court restructurings, forbearance agreements with creditors, and bankruptcy proceedings
- Workouts with Lenders: Our experience has shown us that the most important factor in effectuating a workout with lenders and creditors is ensuring that we remain ahead of the curve, that is, that we engage with lenders and creditors before financials reach a crisis stage. Once a business’ financial condition deteriorates significantly our options become more limited
- Unique Strategies: In the current coronavirus caused financial crisis there are numerous unique strategies that we advise implementing, including early discussions with lenders, thorough review of potential government programs with possible relation to a client’s specific industry, and early financial planning for tight markets
If you are interested in assistance to navigate the financial fallout caused by COVID-19, call our workouts and bankruptcy team for a free consultation and to create a plan. Call Gai Lynn McCarthy or Max Moseley at 678-443-2220