Delayed Raises and Renovations: Small Businesses Face New Uncertainties​​​

Two and a half years into the pandemic, small-business owners say that they’re just beginning to recover from the sudden blow that hobbled many of them during the early 2020 pandemic restrictions, the Washington Post reported. Since then, owners have dealt with surging costs, labor shortages and large swings in consumer demand often influenced by area cases of the coronavirus. Now they’re being barraged by diverging economic messages that have many wondering what to do next. The U.S. economy shrank for a second quarter in a row, reviving fears that the country might be entering a recession. But an exceptionally strong jobs report this month wiped out many of those concerns while also making it harder and costlier for small-business owners, particularly in the hospitality industry, to find and keep workers. At the same time, consumer demand for goods has slowed, and borrowing costs are going up, as the Federal Reserve raises interest rates in the hope of slowing the economy enough to curb decades-high inflation. In interviews, more than a dozen small-business owners outlined the steps they’re taking to guard against a possible economic downturn. Some say they’re putting off routine renovations or bringing on contract workers instead of hiring full-time employees. Others are stocking more lower-priced goods or canceling arrangements with retailers like Target and QVC to sell directly to consumers in a way that will give them more control over production and profits. All of these pullbacks, when multiplied over thousands of small businesses, can work to further cool down the economy.
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Grants Not Enough for Some Eateries​​​

During the pandemic’s early days, restaurant advocates successfully lobbied Congress to create the Restaurant Revitalization Fund (RRF), which would allocate billions of dollars in grants to businesses across the country struggling to survive the coronavirus crisis, which shuttered dining rooms and slashed customer traffic for months, the Washington Post reported. Demand overwhelmed the effort: In Maryland, fewer than 4 out of every 10 applicants were approved. Some $562 million was distributed to 2,024 eligible businesses across the state, and it helped many of them survive. According to the National Restaurant Association, the funds saved 900,000 restaurant jobs across the country, and 96 percent of recipients said the funds helped their establishments remain open. But a year after the majority of that money was distributed, questions have been raised about the effectiveness and oversight of the $28.6 billion program, which is part of the American Rescue Plan and run by the U.S. Small Business Administration. Some restaurants closed despite receiving the grants, a fact that frustrates business owners who lost out on the money. While there is no requirement to pay back the funds as long as the money is spent by March 2023 on eligible operating expenses — including payroll, utilities, rent or mortgage, and supplies — restaurants are supposed to return unused money if they shut down. “There is no publicly releasable list of returnees,” said Christopher Hatch, an SBA spokesman. Hatch declined to comment on individual restaurants. Another SBA spokesperson offered this statement: “The funding provided by the American Rescue Plan’s Restaurant Revitalization Fund, together with other SBA assistance programs, has helped more than 100,000 restaurant and other food and beverage business owners get back on their feet and survive the pandemic.” A recent report from the U.S. Government Accountability Office found issues with the SBA’s oversight of the program. Nationwide, nearly a third of grant recipients had required annual accounting reports that were overdue for submission to the SBA by six months, according to the GAO. And the SBA hasn’t kept track of businesses that closed.
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Bills Extend Statute of Limitations for Prosecuting PPP, EIDL Fraud​​​

President Joe Biden on Aug. 5 signed two bills that give the federal government more time to catch and prosecute fraud related to two of the most popular COVID-19 small business relief programs: the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loans (EIDL), the Journal of Accountancy reported. The bills are:

- H.R. 7352, the "PPP and Bank Fraud Enforcement Harmonization Act of 2022," which extends to 10 years the statute of limitations for fraud charges to be brought in connection with PPP loan applications. The law applies to first- or second-draw loans made under the program.
- H.R. 7334, the "COVID-19 EIDL Fraud Statute of Limitations Act of 2022," which gives prosecutors 10 years to file fraud charges connected to loan applications from the COVID-19-related EIDL program, including EIDL advances and Targeted EIDL advances.

The bills specify that any criminal charge or civil enforcement action alleging that fraud was committed shall be filed not later than 10 years after the offense was committed. The bills passed Congress with bipartisan support. In October 2020, the U.S. Small Business Administration's Office of Inspector General identified $78.1 billion in potentially fraudulent EIDL loans and grants paid to ineligible entities, and another $6.7 billion in loans and grants linked to alleged identity theft. Last year, the agency identified more than 70,000 PPP loans, totaling more than $4.6 billion, that were potentially fraudulent.
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Jobless Claims Drop Slightly, with 250,000 Americans Filing for Unemployment Benefits​​​

The number of Americans filing for unemployment benefits unexpectedly declined last week, suggesting that demand for employees remains strong amid a continuing labor shortage, FoxBusiness.com reported. Figures released Thursday by the Labor Department show that applications for the week ended Aug. 13 edged lower to 250,000 from the downwardly revised 252,000 recorded a week earlier. That is above the 2019 pre-pandemic average of 218,000 claims and just narrowly missed topping the eight-month high of 261,000 recorded in mid-July. New claims in the first week of August were revised down from the preliminary 262,000 reported that would have marked the highest level this year. Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, rose slightly to 1.437 million for the week ended Aug. 6, up by 7,000 from the previous week's revised level. That is the highest level since April. By comparison, one year ago, nearly 11.82 million Americans were receiving unemployment benefits.
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Analysis: SPAC Activity in July Reached the Lowest Levels in Five Years​​​

SPACs were one of the hottest investments on Wall Street early last year, booming alongside cryptocurrencies, meme stocks and other speculative trades as an easy way for buzzy startups to raise money and go public, the Wall Street Journal reported. Fast-forward 18 months, and much of the air is out of the bubble. Shares of companies that went public this way have tanked. Some of the firms have already been acquired by other companies. Some startups that previously agreed to go public by combining with special-purpose acquisition companies are calling off deals and electing to raise money privately. Those who set up SPACs stand to lose a lot of money if they can’t find deals. There are still a few SPAC deals being done, but they are few and far between. The chart below shows how fast SPACs burst onto the scene as a hot investment and endeavor for celebrities, then quickly faded. It shows the money raised by each SPAC since the start of 2020, as tracked by Dealogic. July was the first month in five years that no new SPACs raised money. A few have come to market so far in August, but still at a fraction of last year’s record pace. (Subscription required.)
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Latest ABI Industry Viewpoints Segment Looks at Challenges in the Health Care Sector​​​



ABI Editor-at-Large Bill Rochelle speaks with Cynthia Romano of CohnReznick about current distress in the health care sector and what may lie ahead. Romano is the co-chair of ABI's Health Care Committee and spoke on a panel addressing health care at ABI's 2022 Annual Spring Meeting. Enjoy the discussion!

Upcoming abiLIVE Webinars to Examine Cryptocurrency and Bankruptcy, Commercial Real Estate Distress ​​​

Don’t miss two upcoming abiLIVE webinars looking at key bankruptcy issues!

• ABI's Secured Credit Committee is sponsoring an abiLIVE webinar next Wednesday that will delve into issues involving digital accounts, cryptocurrency and NFTs, including how to get secured and perfected, how to liquidate, and bankruptcy-specific considerations. The panelists also will discuss UCC Article 12 and its impact on the digital-asset world for secured parties. The presentation will help practitioners better understand the considerations and issues they should be spotting when advising their constituents on dealing with digital assets. Register for free!

• Commercial real estate continues to be a sector to watch as we navigate the post-COVID recovery period, which has thus far featured high inflation, rising interest rates, work-from-home preferences and other changes in consumer behavior. ABI's Real Estate Committee is sponsoring a special abiLIVE webinar on Aug. 31 during which seasoned real estate attorneys and advisors will provide an update on where things stand across all of the key asset classes, including office, retail, industrial, multi-family and hospitality, as the important summer season winds down, in order to arm practitioners with important insights as we head into 2022's fourth quarter. Register for free!

International Committee Seeking Nominations for Its First Annual "Matter of the Year" by Sept. 15​​​

ABI's International Committee is proud to announce its First Annual International Committee Matter of the Year Award! The nominated matter needs to involve the U.S. and other jurisdictions and be of some international legal significance and/or impact to international insolvency, as well as international cooperation. Nominations are due September 15, 2022, by 5:00 PM EDT. For more information, visit the International Committee page.

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