Mar 24 – Attorney Articles, Recovery Resources
The Small Business Reorganization Act is Already in Place to Help San Diego’s Small Businesses Struggling to Make Ends Meet with COVID-19
COVID-19 Impact. Small businesses account for more than 50% of the San Diego workforce , for a total of about 697,000 people. This is according to a San Diego Business Journal article “New Study Shows Small Businesses Have Big Footprint in S.D.” by Elise Reuter (January 27, 2019). With the restrictions placed on businesses as a result of the COVID-19 pandemic and with no end yet in sight, many small businesses in San Diego will be especially hard hit and will face difficult decisions going forward as revenue and cash flow slow to a trickle and government relief may not be enough and/or come quick enough.
The Small Business Reorganization Act. The good news for small businesses is that last fall Congress enacted the Small Business Relief Act (“SBRA”) that went into effect on February 19, 2020. The SBRA is designed to simplify, expedite and reduce the cost of a business reorganization for a “small business debtor”.
Small Business Debtor. Under the SBRA, a “small business debtor” means both a small business and an individual who is primarily engaged in commercial or business activity with a current debt limit of $2,725,625.
Significant Changes under SBRA. SBRA modifies some of the more restrictive Chapter 11 rules and procedures such that SBRA should prove to be much more debtor friendly than a traditional Chapter 11 reorganization. Some of the more significant changes include:
- The length of a repayment plan is 3 to 5 years.
- A repayment plan, which can only be filed by the small business debtor, can be approved by the Bankruptcy Court without the approval of creditors.
- The repayment plan process is streamlined and requires the small business debtor to file a repayment plan within 90 days.
- If necessary, the small business debtor can now pay its, his or her professionals through the repayment plan.
SBRA Will Help. In the event a small business and/or a small business owner is facing financial difficulty, the newly enacted SBRA provides the small business debtor with a more efficient, less time consuming and reduced cost opportunity to stay in business, retain employees and reorganize over a 3 to 5-year time period.
Martin Eliopulos is a 29 year insolvency, business litigation and creditor rights and remedies attorney at Higgs Fletcher & Mack. The insolvency team includes John Morrell, Paul Leeds, Maggie Schroedter, Kirsten Worley, and Meredith King.