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New (And Existing) Laws Designed To Provide Financial Relief To Businesses Coping With The COVID-19 Pandemic

March 25, 2020

The COVID-19 pandemic has led governments to require many businesses to shut down or severely curtail their business activities. The sudden economic contraction resulting from these actions has brought financial distress to many small businesses. Businesses struggling under these circumstances may find relief under several new or existing laws designed to assist them.  Below is a high-level summary of a few of these laws:

I.     Federal relief

  1. Small Business Reorganization Act (“SBRA”) – Effective February 19, 2020, the SBRA became available for financially troubled small business debtors.  The Act is a subchapter of the current chapter 11 and generally applies only to “small business debtors,” which are defined as those: (a) engaged in commercial or business activity; and (2) who have noncontingent liquidated secured and unsecured debts as of the petition date of not more than $2,725,625.00. SBRA has simplified the existing chapter 11 process and makes it easier for a small business debtor to reorganize.  A few key benefits for small business debtors are:
    • Immediate Stay from Creditor Action: Once a bankruptcy petition is filed, an automatic stay immediately goes into effect, meaning that creditors must stand down from taking any action to collect debts owed by the small business.
    • Greater Control and Speed: Debtors are allowed greater control over the bankruptcy process, because unlike in a current chapter 11 case, only a small business debtor has authority to file a plan of reorganization. There can be no competing plans. The bankruptcy case will also proceed with greater speed, as well, because the debtor must file a plan within 90 days of the bankruptcy filing.
    • Elimination Of “Absolute Priority Rule. In a chapter 11 bankruptcy, debtors generally cannot retain their interests unless unsecured creditors get paid in full.  This is known as the “Absolute Priority Rule.”  The SBRA, however, eliminates the absolute priority rule if the plan: (1) does not discriminate against creditors unfairly; and (2) is fair and equitable.  The elimination of the absolute priority rule, therefore, allows owners and equity interest holders to retain their interests if the debtor proposes a plan in which all of a debtor’s projected disposable income will be applied to make payments under the plan.
    • Greater Ability to Modify Rights of Secured Creditors. SBRA provides that the rights of secured creditors may be modified: (1) if the claim is secured only by a security interest in real property that is the principal residence of the debtor; and (2) the loan was not incurred to purchase the residence. As such, under SBRA, a small business debtor may be able to modify a mortgage on their residence which was given to secure a guaranty or a line of credit that was used to provide the small business liquidity.
  1. Families First Coronavirus Response Act – While this Act is primarily focused on relief to employees, eligible employers may be provided payroll and/or federal tax credits to assist in covering the costs associated with employee leave. More information about these credits can be found here.  Additional information regarding this Act and other similar laws enacted will be provided as it becomes available and will be posted on our firm’s website.
  2. Other Tax Relief – Families and small businesses now have the option to defer federal income tax payments and the filing of federal income tax returns until July 15, 2020.  Penalties and interest that might otherwise apply during this three-month period for failure to file or failure to pay will be waived.  No extension needs to be filed as the IRS has automatically postponed the due date.


  1. “Short-Time Compensation” Program – Nebraska provides an opportunity for businesses to retain their workforce during a time of temporary economic slowdown to avoid layoffs by permitting them to reduce the number of hours of their staff by between 10% and 60%.   Affected employees are then permitted to receive a partial unemployment benefit to help them offset the loss of income. The maximum duration of this type of plan is 13 months. The program is being offered as part of the unemployment program of the Nebraska Department of Labor.  More information can be found here.
  2. Relief from the Small Business Administration (“SBA”):
    • Economic Injury Disaster Loans: As of March 17, 2020, the SBA has revised criteria for states who are seeking an economic injury declaration related to COVID-19. The relaxed criteria now allow states, such as Nebraska, to offer SBA Economic Injury Disaster Loans (“EIDL”) of up to $2 million per affected small business.  The loans can be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the disaster’s impact.  The interest rate for a small business disaster loan is 3.75% and 2.75% on loans to private nonprofits.  Generally speaking, EIDLs are available to small businesses that cannot obtain credit elsewhere.
      • Eligibility: To be eligible for an EIDL loan, a company must qualify as a small business.  The definition of “small” varies by industry.
      • General Criteria: Among other criteria, the SBA has indicated that it will review the following:
        • An applicant’s credit history;
        • An applicant’s ability to repay the loan;
        • That the applicant is located in a county declared as a Disaster Area; and
        • That the applicant has suffered working capital losses due to the COVID-19 disaster and not due to a downturn in the economy generally or other reasons.
      • Collateral Requirement: While the SBA generally requires collateral for EIDLs, it will not reject an application if a company is unable to provide collateral.  However, small businesses that wish to borrow in excess of $25,000 will likely be required to provide collateral.

A link to submit an application for an EIDL is found here.

Additional information regarding the loans can be found here.

      • Existing Loans: Small businesses who are struggling to repay SBA-guaranteed loans are encouraged to contact their banking professional.  Lenders may have greater flexibility to extend or relax payment requirements as a result of the economic impact of COVID-19.
  1. Relief for Restaurants and Bars – On Friday, March 20th, Governor Pete Ricketts signed an executive order that allows restaurants and bars to sell liquor with take-out or delivery orders. In addition, and while excise taxes on liquor sales will be still be owed, the state is waiving all late fees and penalties on excise taxes.
  2. State Tax Relief:  Following the federal tax extension, on Monday, March 23, 2020, the State of Nebraska announced that it is extending the tax filing deadline to July 15, 2020, for state income tax payments and estimated tax payments were that were originally due on April 15, 2020.
  3. Other Assistance: Nebraska Governor Pete Ricketts has issued a State of Public Health Disaster Emergency, which will trigger additional federal aid money.  More details regarding this aid will likely be available in the coming days and weeks.

If you have any questions about this alert, or what relief may be available to assist you, please contact the Financial Services and Incentives members of our COVID-19 Response Team indentified below.


Lauren Goodman
(402) 341-3070



Nick Niemann
(402) 633-1489



Matt Ottemann
(402) 633-9571


Contact information for the complete McGrath North’s COVID-19 Response Team can be found here.

For information regarding additional business-related concerns centered around COVID-19, please visit our COVID-19 Resource Guide here.