While the evidence is largely anecdotal at this point, the pandemic appears to have outlasted the PPP funds for a growing number of small businesses, a trend that may fuel bankruptcy filings well into next year, said James Hammond, CEO of Boston-based New Generation Research, publisher of BankruptcyData.
“There’s certainly a lot of companies that despite their PPP success at getting some funding, haven’t been able to hold it together and already have shown up in bankruptcy courts,” Hammond said.
That’s the case in federal bankruptcy court in Chicago, where a handful of Chicago-area companies filed for bankruptcy after receiving PPP loans of at least $150,000, according to publicly available SBA data and court filings.
In April, Michael Marinov, a Sarpino’s Pizza franchisee, received about $210,000 in PPP loans through Fifth Third Bank to support payroll for 39 employees at four of his six suburban Chicago locations. Two months later, he filed for Chapter 11 bankruptcy.
The decision was driven both by the pandemic and an unrelated federal lawsuit brought by three former employees alleging labor law violations at the Countryside location, said Ben Schneider, a Skokie attorney representing Marinov in the bankruptcy case.
“He had spent considerable resources over the last couple of years defending himself, and it just got to the point where he couldn’t afford the cost of litigation anymore,” Schneider said.