Sizzler sues SBA for second PPP loan
The channel argues that it was unfairly denied due to bankruptcy.
Legacy brand Sizzler has filed a lawsuit to force the U.S. Small Business Administration to approve its request for a second paycheck protection program loan worth $ 2 million, arguing that the entity unfairly blocks the process due to its bankruptcy.
The 63-year-old channel is fighting to lift a “stay” on its claim, which it says is due to its bankruptcy status. Sizzler notes in the lawsuit that this goes against the new rules. On April 6, the SBA released new guidelines saying it would no longer prevent bankrupt businesses from obtaining loans as long as they got confirmation of a reorganization plan, a process Sizzler completed in January. .
But on May 13, the SBA informed MidFirst Bank, lender Sizzler, that it would remove from its review portal any PPP loan applications that were still pending review due to hold codes. The Sizzler loan application was not approved and was withdrawn. The restaurant scrambled to hire another lender who could reapply, but when it did, the cold “hold” still applied.
The PPP ends on May 31, and Sizzler said there was a “substantial probability” that the remaining PPP funds would be completely depleted even before that date.
“Although Sizzler Restaurants has done everything in its power to secure a PPP Second Draw loan, the SBA’s illegal rules, regulations and practices aimed at illegally preventing debtors from participating in PPP have prevented it from doing so.” , declares the restaurant in the filing. “Sizzler restaurants will suffer a real and substantial loss if they are denied access to PPP funds. This will manifest itself both in the loss of opportunities to obtain funds that are most likely to be forgivable, which other non-debtor entities are able to obtain, as well as in the loss of cash flow to pay employees and managers. basic operating expenses. “
“Denial of access to PPP deprives Sizzler Restaurants of a significant sum of money in the short term, which would greatly facilitate the ability of reorganized debtors to execute the confirmed plan and obtain its discharge,” continues the brand. “Urgent action is needed to right these wrongs before it is too late and Sizzler Restaurants is left unresolved.”
READ MORE: Steakhouse Icon Sizzler files for bankruptcy
At the start of the pandemic, Sizzler applied for a $ 3.9 million PPP loan and received the funds on April 13, 2020. The chain said it was using 100% of the funds for its authorized uses and expects to that he be completely forgiven. However, the brand said the loan was ultimately insufficient to counter COVID restrictions. As a result, Sizzler filed for bankruptcy in September.
As the bankruptcy reorganization plan was confirmed in January, Sizzler said its locations still faced “severe, if not absolute, restrictions on indoor dining.” When a third PPP cycle opened, Sizzler immediately attempted to secure a second PPP loan to “increase the chances of its emergence being successful and save as many jobs as possible in the process.”
Sizzler has applied for a second PPP loan three times. The first was through JPMorgan Chase Bank, but this was quickly turned down due to bankruptcy. The chain then turned to MidFirst Bank in February. When that request was withdrawn, Sizzler turned to Southwestern National Bank and resubmitted a request, but the same bankruptcy “stay” code was present on May 21.
“Since the inception of the PPP, the SBA has illegally administered the PPP by excluding certain types of businesses, including those ‘involved in bankruptcy’, from PPP eligibility without any legitimate basis for doing so,” the filing said. . “The arbitrary and capricious exclusion of debtors from the PPP is manifestly incompatible with the very purpose of the PPP and contravenes the anti-discrimination provisions of the Bankruptcy Code.”
As of May 24, 11.6 million loans worth $ 795.9 billion had been approved.