Miami Business Bankruptcies Go Against the Tide
Unlike the rest of the United States, Miami’s business economy remains strong as bankruptcy filings tend to decline.
Most midsize businesses are staying due to stimulus checks, moratoriums, PPP loans and other government programs where loans are meant to be forgiven, which is essentially free money for businesses, a said Jim Silver, an associate of Kelley Kronenberg.
“What I feel like has happened is that the feds just pumped a ton of money into the economy and basically hid the problem,” he said. declared. “My view is that this was a short-term cosmetic fix and not a long-term resolution to economic problems. If your supply is down and more money is looking for less supply, you going to have a lot of inflation, and that’s what we’re starting to see now.
The good news about PPP loan funds is that they have been injected into businesses to help, said DSI Senior Managing Director Joe Luzinski, “But the bad news, in my opinion, is just a band-aid, not a cure. In the end, that money didn’t fix anything. It just extends whatever problem the company had before.
The tsunami of corporate cleanup that has dragged through the bottom 25% of the economy for more than two years is still going to happen, Luzinski said.
“If you look at it on a long continuum, it’s part of our economy naturally cleaning itself up,” he said. “There are companies that disappear every year and equity investors take that money and redeploy it to other companies to try different things.”
In 2021, 72 Chapter 11 cases were filed in the Southern District of Florida Bankruptcy Court. In July, 49 companies filed for bankruptcy so far this year. Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s affairs, debts, and assets. This form of bankruptcy also allows a business to remain in business and restructure its obligations.
A good number of small businesses are just beginning to file for Chapter 5, which is a new bankruptcy subchapter created by the Small Business Reorganization Act.
“It’s a small version of Chapter 11 that’s supposed to remove some of the barriers to a successful corporate reorganization,” Silver said. “It’s supposed to be cheaper, less complicated, with standards that make it easier to come up with a plan and successfully emerge from bankruptcy.”
Nationally, businesses will face challenges, but not here in South Florida, Lehman added. founding partner at Levine Kellogg Lehman Schneider + Grossman.
“I just heard that the Federal Open Market Committee is going to raise rates more than history tells us that will slow business activity and slow down the recession,” he said. “I see major law firms coming here from monetary centers and a lot of activity in the professional sphere. This means that business transactions are taking place. I just don’t see any cases of bankruptcy filing picking up here, but I think we’ll see it across the country.