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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsPPP loan or no, many small businesses will still face bankruptcy. Here's what that means
Even as millions of small businesses seek and receive funding under the Small Business Administrations Paycheck Protection Program, there is one thing still awaiting some of them after the dollars are exhausted.
Bankruptcy.
Many of the loans, which provide eight weeks' worth of payroll and some overhead costs, will end in June, when the PPP itself is currently set to expire. And that, experts say, is when they also expect to see more companies start to declare bankruptcy especially those that were struggling with cash reserves before the coronavirus pandemic hit.
The companies with access to capital whether private equity, venture capital, institutional investors or even the Main Street Lending Program once it becomes operational are the most likely to survive, said Tenley Carp, a partner at law firm Arnall Golden Gregory LLP. Even a company that attempts to shift its focus to respond to new customer demands for example, a company which pivots from making clothing to making masks will still need some period of time to make that transition.
Experts say the reopening of the economy likely won't save these businesses, particularly the ones who can't adjust to a new way of doing business. And the pace of a reopening, projected to be slow, won't help.
https://www.bizjournals.com/seattle/news/2020/05/01/ppp-loan-or-no-many-small-businesses-will-still.html?ana=e_me_prem&j=90506718&t=Morning&mkt_tok=eyJpIjoiTW1JMFpqTmhOamN5Wm1SaiIsInQiOiJ0b29IM2trZDkwMjdkQzZBMnRIQUh4aG9nMWhcLytIcjliRmFZTUl5NVdcL3o1T1dhT3U5U1Y3OXFCWHN5YStpUTNwQXdcL1g4UU5WbTdnOGlLbHN4NHNxWjh6VUdxVlk0aHc0VE04KzBFaEY2K01pRHNicmNTRDU1SjFkTlhybTQ5ciJ9
Amishman
(5,554 posts)PPP doesn't help with property taxes, inventory (especially businesses with lots of perishables), insurance payments, most debt payments. A lot of businesses are going to fail soon, or get caught in a debt trap and fail later.
Wellstone ruled
(34,661 posts)decades ago ran a small Business. Once you burn through you cash on hand,and you need to go to the Bank and float a lone in order to make Payroll as well as Quarterly Withholding and Taxes as well as lease payments,well,you might be able to hold on for a month if your Accounts Receivables keep coming. All it takes is a Major Receivable to go from thirty days to ninety or a hundred twenty days before payment because like you,they are having a Cash Flow issue as well. There comes a point of Reckoning when you say,enough,and pull the pin just to save the Money Bleed. As Clinton once said in 1992,it's the economy stupid,and he was so right.
Appears the Domino Effect has already happened,and the Landlords who lease or rent the Strip Malls are not going to like the next ninety days .
spinbaby
(15,088 posts)Many small business owners are angry because theyve been forced to shut down but havent seen any government money to keep them afloat. They blame our Democratic governor. I live in rural western Pennsylvania.