From its office in Clayton, Missouri, Danna McKitrick, P.C., delivers legal representation to new and growing businesses, financial institutions, non-profit and government-related entities, business owners, individuals, and families throughout the greater St. Louis region and the Midwest.
Danna McKitrick attorneys practice across many areas of law, both industry- and service-oriented.
Part 4 of a 5-part series: Options for Small Business Owners in Financial Distress
If you’re a small business owner in financial distress, you’re undoubtedly looking for options for your business to have a better chance of surviving the pandemic and other economic surprises of the recent year. In the first three parts of this five-part series, we’ve looked at ideas for improving your business operations, discussed the importance of the availability of cash and improving your cash flow, and reviewed non-bankruptcy options to restructure your debts.
However, you and your attorney may conclude that none of those options meet your needs and it is time to consider a formal bankruptcy filing under the U.S. Bankruptcy Code.
Forms of Bankruptcy Relief
Before getting into details, let me make a suggestion: Don’t be too hard on yourself. It is rare for a business to fail because of only one issue. Even if your actions contributed to the problem, there were most likely other factors beyond your control involved as well. Besides, bankruptcy may provide a chance for you to fix what went wrong.
Another consideration is that the old stigma of filing a bankruptcy case has largely dissipated over the past few decades. Our Founding Fathers realized that the old European use of a debtors’ prison was unworkable and that a structured mechanism to help financially strapped people and businesses navigate a “soft landing” was needed instead. As a result, there actually is a provision in the U.S. Constitution requiring the Congress to make “uniform Laws on the subject of Bankruptcies throughout the United States.”
If you feel embarrassed about filing a bankruptcy, compare it to taking a tax deduction. It’s another example of financial relief provided by statute to individuals and businesses. It’s there for you to use, and there’s no reason to feel guilty for doing so.
The Bankruptcy Code provides for several different types of bankruptcy filings: Continue reading »
Part 3 of a 5-part series: Options for Small Business Owners in Financial Distress
In the first two parts of this five-part series on options for small business owners in financial distress, I suggested some ideas for improving your business operations and the availability of cash so that your small business would have a better chance of surviving the pandemic and other economic surprises of the recent year. In this Part 3, I suggest some ideas on using non-bankruptcy options in an effort to restructure your debts. We will discuss several bankruptcy options in Part 4.
Non-Bankruptcy Options for Restructuring Your Debt
Informal Workouts
If your business has 1) maintained good relationships with its creditors, especially its primary lenders, and 2) doesn’t have too many creditors, it may be able to work itself out of its financial troubles. Secured creditors, of course, must be treated with full respect for their security interests in the business assets. Unsecured suppliers of critical goods and services also must be treated with care, as their cooperation may be needed at some point in the future.
It is often useful to obtain an appraisal of your business assets, both real and personal, from well-respected appraisers experienced in their fields. The appraisal should value the assets at three levels: forced liquidation value, orderly liquidation value, and fair market value. These values will enable you to intelligently discuss the likelihood of collection in different situations.
Another useful action would be to hire a consultant. Sometimes business owners cannot see opportunities for improvement which are right in front of them simply because they think that the current practice works well. The consultant can help you review your company’s operating procedures, cash flow procedures, and pricing structure to look for opportunities to increase profitability. Continue reading »
President Biden announced changes to the Paycheck Protection Program on February 22, 2021, which include an exclusive two-week access period for businesses to apply for PPP loans.
Equal Pay Day 2021 is March 24, symbolizing how far into the year women must work to earn what men earned in the previous year. Thankfully, this date is not static and falls earlier each year with this year falling 19 days earlier than just five years ago. While we celebrate this achievement, we have a long way to go to completely close the pay gap between men and women.
The Equal Pay Act has prohibited sex-based wage discrimination for over 50 years. Under the Act, an employer may justify wage disparities only based on one of four exceptions:
Seniority;
Merit;
Measurement of earnings by quantity or quality of production; or
A differential based on “any factor other than sex.”
The last “catch-all” exception was the focus of Rizo v. Yovino.Aileen Rizo, an experienced middle and high school math teacher, was hired as a math consultant by the Fresno County Office of Education (“Fresno”). Continue reading »
The Paycheck Protection Program (PPP) has reopened to aid small businesses. The “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act” (“Economic Aid Act”) makes several changes to the prior PPP rules that affect all PPP loans and enacts new rules for any new and additional PPP loan funding provided under the Economic Aid Act.
Through the Economic Aid Act, $284.45 billon was authorized for first-draw and second-draw PPP loans with several set-asides for underserved communities. Applications for these extended PPP loans are available until March 31, 2021. In addition to the information below, for further details about the PPP created by the CARES Act and rules that remain in effect, see our prior article here.
First-Draw PPP Loans Under the Economic Aid Act
Those seeking a PPP loan for the first time who thought they missed the deadline under the CARES Act have not lost their opportunity. Thanks to the Economic Aid Act, borrowers who did not receive a PPP loan (under the CARES Act) and meet the requirements may still apply for a PPP loan.
Eligible Entities
Those with 500 or fewer employees that previously would have been eligible for a PPP loan are still eligible if they were operating as of February 15, 2020 and paid salaries and payroll taxes for employees or independent contractors.
Entities with more than 500 employees in certain entities that meet SBA alternative size standards are eligible.
The following entities are now expressly eligible for PPP loans under the Economic Aid Act as well:
MAD Magazine’s Alfred E. Nuemann would famously say, “What, Me Worry?” If you store personal information about your clients or customers on your computer, however, you should worry that it is properly secured.
Hackers and other malevolent individuals on the world wide web are constantly trying to compromise or steal data from your computer system to sell on the dark web. They particularly target names combined with (1) social security numbers, (2) credit or debit card numbers or other account information, (3) security or access codes or passwords, or (4) medical or health insurance information.
Another common form of cyberattack is to plant ransomware on a target’s computer system. Ransomware encrypts the data on the system making it inaccessible to the system’s owner, leaving a ransom note as the only thing readable on the affected system. Continue reading »
Illinois law traditionally has not allowed for prejudgment interest on personal injury claims, but that rule is about to change. On January 13, 2021, the Illinois legislature passed House Bill 3360. The original purpose of the bill was to amend Illinois law relating to mortgage foreclosures and abandoned residential property. However, Senate Floor Amendment No. 1 modified the bill to introduce prejudgment interest for personal injury claims in Illinois.
Prejudgment interest on personal injury actions was not available under the common law, so generally it is only allowed when authorized by a statute. Illinois HB 3360 provides that in all actions for personal injury or wrongful death, the plaintiff shall recover prejudgment interest on all damages set forth in a subsequent judgment at the interest rate of 9% per annum.
Of note is when prejudgment interest begins to accrue under the bill. Among the jurisdictions allowing prejudgment interest on personal injury claims, a plethora of approaches has emerged for determining the starting point. Some states require the rejection of a formal demand with specific requirements (such as Missouri, § 408.040 RSMo.), others from the date of the loss (such as Florida, Fla. Stat. § 687.01), or still others from the date of the filing of the complaint (such as Michigan, Mich. Comp. Laws § 600.6013). Continue reading »
It’s no secret that many small businesses are facing financial troubles these days, not only because of the COVID-19 pandemic, but also because of the rapid and unpredictable twists and turns of the current economy. This article will discuss, in two parts, the various ways in which a financially troubled business can seek financial relief, ranging from informal negotiations and state statutory remedies to filing a Chapter 11 reorganization bankruptcy case, so that attorneys can provide general assistance to their small business clients, or refer them to an insolvency attorney if appropriate.
Part I: Negotiations and State Statutory Remedies
Informal Workouts
If a debtor is on good terms with its creditors, especially its primary lenders, it may be able to earn itself out of its financial troubles. The secured creditors, of course, must be treated with full respect for their security interests in the assets of the debtor. Unsecured suppliers of critical goods and services also must be treated with care, as their cooperation may be needed at some point in the future.
It is often useful for a debtor to obtain an appraisal of its assets, both real and personal, from well-respected appraisers experienced in their fields. The appraisal should value the assets at three levels: forced liquidation value, orderly liquidation value, and fair market value. These values will enable the debtor to intelligently discuss the likelihood of collection in different situations.
Another useful action would be to hire a consultant. Sometimes business owners cannot see opportunities for improvement which are right in front of them, simply because they think that the current practice works well. The consultant can help the owner review the company’s operating procedures, cash flow procedures and pricing structure to look for opportunities to increase profitability.
The consultant also could prepare projections of future profitability for the company, based upon the opportunities which are discovered. Armed with the collateral valuations and projections, the owner can show the company’s creditors a plan for solving its problems.[1] That is much more effective than simply asking for more time or engaging in stalling tactics.
Getting back to normal in the next year or so may be impossible without the widespread use of COVID-19 vaccines. Although authorities do not anticipate the vaccines will be widely available until Spring 2021, employers should be considering whether to mandate or merely encourage vaccinations in the workforce.
Currently there is no definitive answer regarding mandatory vaccinations, and your plan will depend on many variables. Because this is the first pandemic in our memory and it is all new to us, consider forming a committee to monitor the status of laws, regulations, and guidance from various agencies.
Your business may be one of the lucky ones that navigated the pandemic without causing a loss of morale or culture, operating safely by working remotely, social distancing, wearing masks, and following CDC requirements. If so, setting aside all other factors, you may simply want to encourage vaccinations for the first few months that they are available, especially given potential concerns about the safety and efficacy of the vaccines and the ever-changing laws. You could do this by training and educating employees as to the efficacy of the vaccine, encouraging participation, and offering the vaccine for free (if not covered by insurance) at the workplace during work hours. Continue reading »
For years, commercial drivers and transportation companies have urged the Federal Motor Carrier Safety Administration (FMCSA) to provide greater flexibility in the hours of service (HOS) regulations. This call grew even louder following the implementation of the electronic logging device (ELD) mandate. This summer, FMCSA finally announced revisions to the hours of service regulations. The new rules went into effect on September 29, 2020.
The FMCSA’s rule changes affect four areas: the short-haul exception; the adverse driving conditions exception; the 30-minute break requirement; and the sleeper berth provision. Additionally, although it is not a formal rule change, the FMCSA issued new guidance regarding personal conveyances. These updates will help provide flexibility to an industry that often grapples with rigid regulations that have failed to keep pace with reality.
Short Haul Exemption
The short-haul exemption applies to drivers who report at the same location at the start and end of each workday and operate in a limited area. These drivers can keep a time record in place of the more burdensome HOS log. FMCSA’s new rule increases the geographic restriction from 100 air-miles to 150 air-miles. This change will allow motor carriers utilizing this exemption to expand their range, and some drivers whose regular routes previously prevented them from taking advantage of the exemption now can do so. Further, the on-duty limit for short haul operations has increased from 12 hours to 14 hours. Continue reading »
