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The streamlined and cost-effective processes within the Small Business Reorganization Act will be a key part of helping struggling small businesses reorganize amidst the COVID-19 economic crisis, according to a Bloomberg Businessweek analysis. Taking effect just two months ago, the new provisions had applied only to businesses or proprietors with less than $2.7 million in debt. But then, in late March, Congress temporarily upped this debt cap to $7.5 million as part of the $2 trillion CARES Act package. "The goal of the Subchapter V is to let the small business owner remain in possession of the assets," says Deborah Williamson, who heads the bankruptcy practice at the law firm Dykema. A small-business debtor must choose, or "elect," a Subchapter V proceeding. Otherwise the case will fall under the normal rules — and, says Williamson, there's no reason to do that unless you're determined to sell the company "and avoid working for the creditors." That's especially true now, because the $7.5 million debt ceiling in the coronavirus relief law applies only to Subchapter V cases. However, she says, companies that are already reorganizing through chapter 11 and that qualify for Subchapter V treatment can switch to it. The higher cap is much closer to the $10 million debt limit recommended by ABI's Commission to Study the Reform Chapter 11 originally sought. As the law currently stands, the limit will fall back to the parsimonious $2.7 million cap after one year, on March 27, 2021.

Major metropolises including Austin, Baltimore, Boston and Detroit may struggle to access a $500 billion emergency lending program meant to shore up local governments’ cash-starved budgets under rules that limit participation only to cities with 1 million or more residents, the Washington Post reported. The program, administered by the Federal Reserve in coordination with the Treasury Department, seeks to buy short-term debt from cities, which should push down interest rates and help local leaders borrow at a time when they are facing a severe cash crunch as a result of the coronavirus pandemic. Under the rules of the program, though, only 10 cities and 15 counties are large enough to be able to sell directly to the Fed, according to 2018 census figures, which the Fed cites in its public guidance. That would include New York City, Los Angeles, Chicago, Houston, Phoenix, Philadelphia, San Antonio, San Diego, Dallas and San Jose. Counties, meanwhile, must have at least 2 million people to participate, a list that includes four counties in California, three in Texas, two in New York and one in Florida, Illinois and Washington. The local governments can still try to take advantage of the Federal Reserve’s $500 billion aid facility through their individual states. But the sheer fact they face such hurdles in the midst of an economic crisis drew sharp criticism from Democratic lawmakers. In a letter to Fed Chair Jerome H. Powell, sent Friday, Sens. Chris Van Hollen (Md.), Elizabeth Warren (Mass.) and five other party leaders called on the government to rethink the program, saying it threatens to imperil “hundreds of communities nationwide.” Lawmakers added that Congress never intended such restrictions when it adopted the $2 trillion aid package that President Trump signed into law last month. The CARES Act appropriates funds for the program targeting municipal bonds.

Small businesses led by women, minorities or people from rural areas are looking for aid from the Small Business Administration’s Paycheck Protection Program aimed at helping smaller companies survive the fallout from the coronavirus pandemic. But getting a slice of the roughly $350 billion set aside under the PPP so far is a challenge for lenders, who are struggling to gear up as quickly as banks and other lending institutions with greater resources, the Wall Street Journal reported. “We didn’t get started as quickly as the others did, so we’re worried that by the time our program gets in place, that all of the funds for PPP would have been allocated,” said Matthew Raker executive director of Mountain BizWorks, a nonprofit loan fund focused on lending to small businesses that typically have trouble securing loans through traditional financial institutions. Democrats in Congress are looking to address that issue by setting aside roughly half of $250 billion in additional PPP funding for what are known as Community Development Financial Institutions such as Mountain BizWorks, along with other lenders such as credit unions and community banks. That effort has faced resistance from Republicans, leading the emergency-funding appropriation to stall last week. Sen. Marco Rubio (R-Fla.), who has helped spearhead the small-business relief efforts, said he favors expediting the current legislation and believes more community lenders should be encouraged to participate through other means. Democrats counter that community lenders, credit unions and other nonbank lenders serve small, fledgling businesses that are now at high risk of going under — and are typically underserved by traditional lenders.

Flooded by requests for help like never before, a federal disaster loan program that was supposed to deliver emergency relief to small businesses in just three days has run low on funding and nearly frozen up entirely. Now, business owners who applied are desperate for cash and answers about what aid, if any, they are going to receive, the New York Times reported. The initiative, known as the Economic Injury Disaster Loan program, is an expansion of an emergency system run by the Small Business Administration that has for years helped companies after natural disasters like hurricanes, floods and tornadoes. To speed billions of dollars in aid along, the government directly funds the loans, sparing applicants the step of finding a lender willing to work with them. But in the face of the pandemic, the loan program is drowning in requests. Many applicants have waited weeks for approval, with little to no information about where they stand, and others are being told they’ll get a fraction of what they expected. The program is supposed to offer loans of up to $2 million, but many recent applicants said the SBA help line had told them that loans would be capped at $15,000 per borrower. The CARES Act, the $2 trillion relief bill signed by President Trump last month, also authorized the SBA to hand out the first $10,000 as a grant that didn’t have to be paid back. Those funds were supposed to be available to applicants within three days of their application, even if they weren’t approved for a loan. That hasn’t happened, according to more than 400 applicants who contacted the Times.

A new debate broke out on yesterday over the next infusion of federal dollars needed to bolster an economy battered by the coronavirus pandemic, as Democrats pressed to add money for hospitals and state and local governments to an emergency infusion of $250 billion requested by the Trump administration to help distressed small businesses, the New York Times reported. The counterproposal, put forward by Speaker Nancy Pelosi of California and Senator Chuck Schumer of New York, the minority leader, threatened to slow down the additional round of funds for a new loan program created by the $2 trillion stimulus package for small businesses, which the administration and Republicans had hoped to speed through Congress by the end of the week. “The bill that they put forth will not get unanimous support in the House,” Pelosi said. The debate is over an interim measure that lawmakers in both parties agree is necessary to reinforce the small-business loan program — which had a troubled rollout and has been inundated with requests from desperate companies — before Congress turns to a more sweeping bill it has begun referring to as “Phase Four” of the coronavirus aid efforts. But even the smaller, more immediate measure has created some friction. In a joint statement yesterday, the Democratic leaders said that they supported the administration’s request for an additional $250 billion for the loan program. But they said $125 billion of that should be directed to underserved businesses that might otherwise have trouble securing loans, including those that are owned by women, people of color and veterans, or situated in rural areas.

Congress’s next stimulus bill to prop up the U.S. economy during the coronavirus crisis will be at least another $1 trillion, House Speaker Nancy Pelosi told Democrats on a private conference call, Bloomberg News reported. The next stimulus package would be focused on replenishing funds for programs established in Congress’s $2.2 trillion virus relief bill signed into law last month, according to people on the call. Pelosi said that there should be additional direct payments to individuals, extended unemployment insurance, more resources for food stamps and more funds for the Payroll Protection Plan that provides loans to small businesses, lawmakers on the call said. Pelosi also said the bill should assist state and local governments, with an emphasis on smaller municipalities with fewer than 500,000 residents, one lawmaker said. Pelosi has said she wants the next stimulus bill to be passed this month. The House isn’t scheduled to be back in session until April 20 at the earliest. It is possible to pass legislation with most members out of town, as long as no one objects.

Not able to catch the live stream of yesterday’s all-star panel on an abiLIVE webinar discussing the CARES Act and tools to navigate the financial crisis related to COVID-19? Watch a replay as former U.S. House Speaker John A. Boehner of Squire Patton Boggs (Washington, D.C.) joins Karol Denniston of Squire Patton Boggs (San Francisco), Michael C. Eisenband of FTI Consulting (New York), Brian Kennedy of FTI Consulting (Washington, D.C.) and Ed J. Newberry of Squire Patton Boggs (Washington, D.C.) with moderator Stephen Lerner of Squire Patton Boggs (Cincinnati, Ohio) in providing their perspectives. Click here to watch for free (please make sure to provide your member log-in to access the video).

U.S. Senate Majority Leader Mitch McConnell said on Friday the U.S. Congress will work on another coronavirus relief bill, with healthcare topping the list of priorities, Reuters reported. McConnell’s comments, in an interview with the Associated Press, signaled leading Republicans were willing to join Democrats in working on what would be a fourth bill responding to the pandemic, which has taken over 6,000 lives in the United States, with over 25 percent in New York City. Infections in the United States account for about 24 percent of the more than 1 million cases worldwide. Previously McConnell had shown little interest in joining Democratic House Speaker Nancy Pelosi in working on another coronavirus measure, saying lawmakers should wait to see whether more aid is needed after the Trump administration implements the three response bills already passed by Congress, including an unprecedented $2.3 trillion package signed into law on March 27. Read more.

Don’t forget to register for these important abiLIVE webinars:

- TODAY: Tools to Navigate the Financial Crisis Related to COVID-19 (Panel features Former House Speaker John Boehner!)

- Tuesday: The Consumer Provisions of the CARES ACT, and Local Court Responses to the Pandemic

- Wednesday: Preference Update: SBRA’s Due Diligence Requirement

Top Democratic lawmakers have urged Treasury Secretary Steven Mnuchin to quickly provide American airlines with direct payroll assistance and to avoid insisting on overly restrictive terms that could deter companies from taking the money, the New York Times reported. Major airlines began submitting their applications for government support to the Treasury Department on Friday but there is growing concern within the industry that Mnuchin will demand strict terms to ensure that taxpayers are compensated, such as large equity stakes in the companies. Some of the airlines, which have seen demand plummet as the coronavirus pandemic has stalled global travel, are wary of giving the government too much control over their businesses and accepting strict conditions tied to the aid. Democrats fear that if Mnuchin drives too hard of a bargain, airlines will balk and lay off more workers. In a letter that was sent to Mnuchin on Sunday, Sen. Chuck Schumer of New York, the Democratic leader, and Speaker Nancy Pelosi (D-Calif.) warned that it would not be in the public interest if the airlines were to choose to declare bankruptcy.