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Prof. Ted Janger of Brooklyn Law School sent Prof. Bob Lawless of the University of Illinois College of Law a proposal for a small change to the Bankruptcy Code that might significantly help small businesses affected by the COVID-19 pandemic, according a post by Lawless in the Credit Slips blog. His idea merits consideration: "In the wake of COVID-19, Congress should raise the debt ceiling [currently within the new Small Business Reorganization Act] to $10 million to help more small businesses and soften the inevitable fallout that will come from COVID-19 related business disruptions," according to Janger. Janger's proposal highlights that COVID-19 bankruptcies are likely to be different from the most recent crop of media and manufacturing bankruptcies. "[COVID-19 bankruptcies] will result from a temporary but brutal cash flow hit on otherwise viable businesses. This is precisely the situation chapter 11 handles best — recapitalization of a viable, but financially distressed business," Janger writes to Lawless. Prof. Lawless said that he calculated that a $10 million threshold will raise eligibility from 42% to 59% of all cases. "Congress might even consider a temporary increase that is even higher until the crisis passes," Lawless writes.

Startups and small companies would be allowed to raise more money from investors when they opt for light-touch fundraising methods under a plan made public Wednesday by the Securities and Exchange Commission, the Wall Street Journal reported. The proposal seeks to further ease rules for measures such as crowdfunding, which was supposed to make it cheaper and easier to raise limited pools of capital online. The plan, passed on a 3-1 vote, shows how Trump-appointed regulators are still trying to make those measures more useful to small firms that lack access to alternatives such as venture capital. Under the plan, which is open for public comment for 60 days, firms could use crowdfunding to raise as much as $5 million, up from about $1 million under current rules. Congress set the $1 million cap in a 2012 law, and the SEC is proposing to use its broad authority to waive that restriction and increase the limit. Business groups have lamented for years that crowdfunding hasn’t been widely used because the rules set a relatively low fundraising cap. At the same time, the rules require many companies using crowdfunding to provide investors with audited financial statements, which increases the cost of selling stock or debt. There were 519 completed crowdfunding deals from 2016 to 2018, with a median amount raised of $107,367, SEC staff said in a report last year. The median investor contribution per deal was just $260, the report found. (Subscription required.)

A decade of growth in the U.S. economy allowed cities to patch fiscal holes left by the financial crisis and recession, but a surprising number now see new signs of trouble, the Wall Street Journal reported. The proportion of American cities expecting general-fund revenue to drop more than 3 percent when the books close on the 2019 fiscal year increased to 27 percent from 17 percent in fiscal 2018, when adjusted for inflation. That is one of the findings from a Wall Street Journal analysis of data collected from 478 U.S. municipalities by the National League of Cities, an advocacy group. The total general-fund revenue reported by these cities — locales that span the U.S. — is expected to be lower in fiscal 2019 than in fiscal 2018, adjusted for inflation, the first such dip in seven years. Cities in the survey range in population from the low tens of thousands to the millions.

At a congressional hearing yesterday, Treasury Secretary Steven Mnuchin opened the door to actions to boost the economy and help businesses and workers in the future while trying to calm fears about the immediate impact of the outbreak, The Hill reported. But even as the Trump administration grapples with the public health aspect of the outbreak, there are mounting questions about its economic response. Democrats were eager for the administration to detail an economic response beyond boosting pressure on the Federal Reserve to slash interest rates, especially after the central bank delivered an emergency cut amid Mnuchin’s testimony. The Fed announced Tuesday its first intermeeting interest rate cut since 2008 after weeks of pressure from the administration and plunging financial markets. Democrats asked Mnuchin about steps the administration might take to help small businesses hurt by the outbreak and workers who may stay home if the virus becomes more widespread but who don’t have sick leave. Mnuchin said that the administration has created a sub-task force at Treasury to examine business issues related to the outbreak and that the administration may come back to Congress seeking specific actions. He also said the administration isn’t currently considering suspending tariffs on European and Chinese goods but that the White House would examine its options as the outbreak progresses. Read more. 

Don’t miss a special abiLIVE webinar on March 10 looking at supply chain disruption & other financial effects of the coronavirus. Register here.

Some American Express Co. salespeople strong-armed business owners to increase card sign-ups, according to more than a dozen current and former AmEx sales, customer-service and compliance employees, the Wall Street Journal reported. The salespeople have misrepresented card rewards and fees, checked credit reports without consent and, in some cases, issued cards that weren’t sought, the current and former employees said. An AmEx spokesman said the company found a very small number of cases “inconsistent with our sales policies.” “All of those instances were promptly and appropriately addressed with our customers, as necessary, and with our employees, including through disciplinary action,” he said. Current and former employees said that the dodgy sales tactics date to at least 2015, when AmEx was scrambling to retain Costco Wholesale Corp. small-business customers after the warehouse club ended their long-running partnership. The deal’s demise was a huge blow to AmEx. For 16 years, the warehouse club didn’t accept credit cards in its stores from any company but AmEx. AmEx also issued credit cards branded with the Costco logo that offered special perks. Small businesses were a particularly valuable slice of the Costco cohort. The warehouse club sells a lot of things they need—two-liter jugs of olive oil, bulk cleaning supplies, big-screen TVs, tires for their delivery vans. AmEx was about to lose the stream of fees on all of those card purchases.