Catch ‐​11

George SelginThe government ' s plan for saving small and medium-sized businesses from liquidation puts them in a bind that brings to mind the one Yossarian had to contend with. The problem, in a nutshell, is this: Chapter 11 bankruptcy may be many firms ' best hope for surviving the present crisis. But to take advantage of it, they need credit —the cheaper the better. Firms can get cheap credit through either the Small Business Administration ' s (SBA ' s) Paycheck Protection Plan or the Fed ' s Main Street Lending Programs. But there ' s a catch: to qualify for these loans, they mustn ' t file for Chapter 11.That ' s Catch-11, and it, too, is some catch.In this post, I ' ll quickly explain how Chapter 11 bankruptcy can help firms survive the crisis, and why many firms may need financial assistance to take advantage of it. Next I ' ll explain why they can ' t get such assistance from either the SBA or the Fed. Finally, I ' ll consider some options for getting around Catch-11.Chapter 11Although the government can ' t undo the damage caused by the coronavirus epidemic or steps taken to contain it, there are things it can do to help sound firms survive, so as to avoid unnecessary waste and an unnecessarily slow return to full employment." Helping " a business means helping it to pay its bills. The government can do this by giving or lending a firm money. It can also allow the firm to put-off payments as it reorganizes its debts. In the U.S., Chapter 11 bankruptcy is one way f...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs