Welcome to the Small Business Rundown. Each day, we bring you stories that impact small business owners and their workforce.
Small Business News Highlights for June 24:
- Public officials grapple with reopening as cases rise across the country
- Small businesses facing serious cash shortage
- Who is liable for paying back PPP loans if small businesses fold
Public officials grapple with reopening
“Because the spread is so rampant right now, there’s never a reason for you to have to leave your home. Unless you do need to go out, the safest place for you is at your home.”
The governor of Texas is urging residents to stay home again, while New York, New Jersey and Connecticut are implementing strict quarantines for travelers and the state of Washington has mandated face masks in public.
These are just a few of the measures that officials are taking in an effort to keep from implementing strict lock downs again in the face of rapidly rising COVID-19 cases in hotspots across the country. Seven different states have only recently announced their highest number of hospitalizations since the pandemic began.
Small businesses facing cash shortages
“Clubs that have opened are opening at 25%–50% capacity, while still having 100% of their expenses.”
Despite billions of dollars of federal aid, a significant number of small businesses are reporting that their chances of long-term survival are dwindling. In fact, 43% of small businesses who received PPP funds say that they will be out of cash next month, while businesses that did not receive government aid are predicting even less time before their reserves dry up.
Who is liable for paying back PPP loans if small businesses fold?
“I received the loan, I’m going out of business, now what happens to my loan liability?”
For businesses that did accept PPP funds but must ultimately close their doors, the question becomes: do I have to pay back this money?
Experts say that PPP loans for $25,000 or less have favorable terms for borrowers and can be discharged in bankruptcy proceedings. Furthermore, these loans did not require collateral, giving banks or the government no property to seize in the event of forfeiture.
Larger loans and those obtained through other programs have different terms, however. And experts agree that defaulting on a loan should always be a last resort and that businesses should seek bankruptcy protection first.