Firm obtains stay order forestalling collection of $4M SBA loan
Benjamin Wish and Jason Brown obtained a stay order in federal court stopping a lender from liquidating collateral assets to satisfy a $4 million commercial loan to the firm’s client, a medical diagnostics company.
The company is seeking an extension of time to pay the Small Business Administration loan because of the near fatal blow to its business caused by COVID-19.
The stay order of U.S. District Court Judge Richard Stearns preserves the status quo until the Massachusetts Supreme Judicial Court issues a ruling in a pending case involving a similar issue – whether a borrower can defend against collection of a commercial loan on the basis that COVID-19 made it impossible or impracticable to repay the loan.
Oral argument in the SJC matter will likely take place in October.
Judge Stearns reserved his right to later rule on and potentially allow the request for preliminary injunction by the firm’s client.
The company provides test kits that assess whether patients have gastrointestinal diseases. The pandemic caused medical providers to focus on treating COVID patients, dramatically lessening requests for the company’s test kits. As a result, its revenues dipped considerably while its operational costs increased.
The company’s pending request for preliminary injunction seeks to prevent the lender from enforcing the loan’s default provisions and liquidating or foreclosing on any portion of the collateral securing the loan.