Adams and Reese Partner Chris Kane is interviewed in a Nosh.com article, “Is SBA Bureaucracy Bankrupting Small Businesses? It’s Not That Simple.”
The article explores how the terms and repayment obligations of several SBA programs and disaster loans, including the Economic Injury Disaster Loan, have impacted packaged food industry businesses in the four years following the COVID-19 pandemic.
The EIDL program supports small businesses in the wake of unforeseen events such as natural disasters and the COVID-19 pandemic. It allows small businesses owners to borrow anywhere from $10,000 up to $2 million; the funds are intended as a substitute for working capital. But unlike the Paycheck Protection Program (PPP), EIDLs are not forgiven. “This is a loan that is to be paid back, no different than any other debt,” Kane said.
Therefore, EIDL recipients are now facing the task of repaying their loans, which some business owners were not aware of the requirements until recently.
“The concern I had then, and the concern that we see now, is that folks that were making business decisions in the midst of the unknowns of COVID [rightfully so, but] in a much more siloed environment,” said Kane in the Nosh.com article. “People weren’t thinking about: what does this mean for growth, and what does this mean for me in terms of my business’ five-year plan? It was, ‘Hey, we need to survive. We think we need this money and we’re going to take it.”
The SBA lent upwards of $390 billion to small businesses via EIDL during the onset of the pandemic – the most it had ever lent under the program.
The Nosh.com reporter interviewed several food industry businesses about their EIDL loans, discovering that the repayment itself is not the issue. “These small business owners feel the required personal guarantees have created a massive hurdle to growth, leaving them with little options to dig their way out of the debt without risking bankrupting both their businesses and themselves,” wrote reporter Adrianne DeLuca.
For those wanting to sell their business outright, the SBA will assess requests based on need, said Kane. “I have been told by folks at the SBA what they will consider is, if there is an ownership structure change or a sale of a company that is driven by hardship – so the company is going to go bankrupt, it’s a desolate situation, and somebody is willing to come in and buy it and maintain the company, maintain the jobs, whatever it might be – that story is going to be way more sympathetic for the SBA to provide the consent and they’ll view that as a hardship exception.”
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Nosh, a product of BevNET.com, is a news website that provides coverage of the food industry. Its readers include entrepreneurs, brand leaders, suppliers, distributors, retailers, investors, and service providers looking to learn, network, and stay updated on the evolving trends shaping the packaged food industry.
At Adams and Reese, Kane is a Partner in the New Orleans office, Global Trade, Transportation and Logistics Team Leader, and one of the leading members of the Crisis Preparedness and Response Team. Kane represents clients on economic development, transportation law, construction law, regulatory and government relations, disaster recovery, and litigation. He is the current board chair of GNO, Inc. – the economic development arm of New Orleans.