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PPP Loans, EIDL Loans & SBA Issues in Bankruptcy


While PPP and EIDL did a lot to help business owners in the United States, there are a lot of rules, regulations, and stipulations in regard to their usage. The complexity of these loans is further compounded for the many in a position in which they have to file for bankruptcy. To learn more about these loans and their legal implications, please reach out to a Florida bankruptcy attorney from Sharmin & Sharmin today.

How the SBA Rolled Out Protections for Businesses

In light of the COVID-19 pandemic, the United States Government unleashed a $2.2 trillion stimulus bill called the Coronavirus Aid, Relief, and Economic Security Act (CARES). This bill was passed in March 2022 to fight against some of the strains the American economy was facing due to the pandemic. The CARES Act targeted furloughed workers, families with children, independent contractors, corporations, the healthcare system, and small businesses. 

While the CARES Act provided many services, 38% of the budget was allocated to loans. In addition, small and large businesses made up 26% and 23% of funding recipients, respectively, making them two of the three top recipients of the most extensive financial rescue package in United States history. Much of the aid was passed through the Small Business Administration (SBA), which was newly able to help out businesses. 

Among the aid given to businesses were loans through the Paycheck Protection Program, commonly referred to as PPP loans. PPP loans applied to any business that had less than 500 employees, allotting them a Small Business Interruption Loan of up to 2.5 times their average monthly payroll with limitations. One of the most important parts about this loan, however, is that the loan repayment program had the opportunity to be waived if the owner provided proper documentation. 

Another relevant loan was the EIDL (Economic Injury Disaster Loan), which also targeted small businesses that were negatively impacted by the COVID-19 pandemic. Depending on a business’s needs, they could apply for up to $10,000 in aid that did not have to be paid back. Conversely, more money could be borrowed that needed to be paid back, but without a personal guarantee. 

Potential for Bankruptcy in Florida

Although there were many benefits to PPP and EIDL loans, they were unfortunately not always enough to prevent American businesses from going under. Many individual business owners decided to opt for Chapter 7 or Chapter 13 bankruptcies in order to get a chance at a fresh start with their business. 

Despite the seeming ease of filing for bankruptcy, the presence of PPP and EIDL loans has the potential to influence bankruptcy filings. For example, it is critical to ensure that PPP and EIDL loan owners have them properly listed on their bankruptcy schedules. This, in turn, properly notifies the SBA and other authorities to get a better idea of what is going on. Further issues such as the attachment of a personal guarantee, the size of the loan, the attachment of collateral, and more are legally-critical aspects of filing for bankruptcy as a business owner. 

Sharmin & Sharmin, By Your Side During Rough Times

One of the only ways to ensure that your bankruptcy goes smoothly and efficiently is to contact a Florida business bankruptcy attorney from Sharmin & Sharmin. Our team of lawyers will be able to successfully examine the legalities and feasibility of the bankruptcy in question in relation to loans provided through the CARES Act or otherwise. Call us today for a free consultation at 1-844-SHARMIN. 

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