Neguse and Cline Unveil Bipartisan, Bicameral Initiative to Help Small Businesses Restructure Debt

Provision would give small businesses new avenues to restructure after suffering financial hardships

Washington D.C.— Today, Congressman Joe Neguse and Congressman Ben Cline (R-VA) unveiled a bipartisan, bicameral measure to create new restructuring procedures for small businesses and streamline existing programs.

“Small businesses employ over a million Coloradans and make up 99.5% of business across our state, but the COVID-19 pandemic has left many of them reeling from immense financial hardships,” said Congressman Joe Neguse.“When our small businesses thrive so do our Main Street economies and our communities. The Small Business Reorganization Act, which we are introducing today is a common-sense measure that gives much-needed additional lifelines to local small businesses as they get back on their feet and find the best way to restructure themselves.”

“The Small Business Reorganization Act has served as a lifeline for struggling businesses throughout the COVID-19 pandemic,” Cline said. “Since its inception, 80 percent of small business debtors have used the provisions of this bill, meaning more entrepreneurs have been able to keep their doors open and employees on payroll during these uncertain times. I’m pleased to join Congressman Neguse in introducing this legislation to ensure the SBRA continues to function effectively for those in need.”

The Small Business Reorganization Act (SBRA) is the companion to the legislation introduced in the Senate by Senators Chuck Grassley (R-IA) and Sheldon Whitehouse (D-RI). The SBRA would empower small business owners as they navigate the restructuring process by establishing a new subchapter in Chapter 11 bankruptcy that would allow them to retain a stake in their business if they opt for Chapter 11. Other provisions in the SBRA would encourage quick reorganization and remove unnecessary procedural costs for debtors, thus helping small businesses bounce back stronger than before.

Originally designed to serve multi-million dollar businesses and corporations, Chapter 11 in the bankruptcy code outlines protocols for complex business reorganizations. And though Chapter 11 contains some provisions focused on helping small business, research overwhelmingly shows that Chapter 11’s high costs and procedural roadblocks hurt Main Street more than they help, hindering a small business’ chances at a successful reorganization.

Background:

Amidst the COVID-19 pandemic, Congressman Neguse has introduced multiple bills to help small businesses weather the economic impacts. His EIDL Forgiveness Act, which calls for the exclusion of Economic Injury Disaster Loan (EIDL) Advance grants when determining forgiveness for a Paycheck Protection Program (PPP) loan, was incorporated into the bipartisan, bicameral COVID-19 relief package passed in December. The legislation clarifies that businesses that received both a PPP loan and an EIDL Advance grants can still receive full PPP loan forgiveness, regardless of benefitting from each program. As Co-Chair of the Congressional Caucus on Innovation and Entrepreneurship, Congressman Neguse is also leading bipartisan legislation to expand federal contract opportunities for small businesses, and recently incorporated a measure in the House-passed NDAA to expand diversity in apprenticeships. Following the Cameron Peak and East Troublesome Fires, Congressman Neguse helped secure a disaster declaration to bring in Small Business Administration relief to support businesses impacted by the fires.