How does giving businesses loans help exactly? You've just added debt to their financials without any corresponding increase in revenue to offset it, either now or in the future, and decreased their ability to take out more effective loans later. A small business simply cannot guarantee revenue streams to pay back giant loans after the current crisis is over, nor do they have the financial strength to weather an entire quarter or more of virtually no revenue.
If you want to save small businesses, you need to hit pause on all their bottom line costs until demand picks back up. That means freezing mortgage/rent payments, property taxes, and other debt obligations they have today. Anything short of that is mostly wishful thinking or throwing tax dollars at a non-viable solution. Also note that this doesn't help small business employees - I don't care how kind-hearted a business owner is, you can't pay employees when you're not making any money. Taking on giant loans to pay them is ridiculous - you're better off having the government pay them instead.
Loans help small businesses the same way it helps the large businesses to buy time / ride the crisis. You have a lengthy pay back period and the interest rate is zero - offers liquidity. Many small businesses have only 30- 60 days opex as cash.
Freezing the debt obligation helps too - but it is harder to implement that since there are many parties involved in that transaction.
Loans don't help small businesses the same way they do large ones because small businesses don't have the margins and market size to be able to pay them back in the future when things pick back up. They would get through this crisis and have the exact same financials they did before, except worse because now they've got a fat load of debt hanging on their balance sheets forever.
Yeah, loans sound like a way to help the loan giver out, rather than the business, and the stress it puts on their cash flow might end up stunting growth.
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How does giving businesses loans help exactly? You've just added debt to their financials without any corresponding increase in revenue to offset it, either now or in the future, and decreased their ability to take out more effective loans later. A small business simply cannot guarantee revenue streams to pay back giant loans after the current crisis is over, nor do they have the financial strength to weather an entire quarter or more of virtually no revenue.
If you want to save small businesses, you need to hit pause on all their bottom line costs until demand picks back up. That means freezing mortgage/rent payments, property taxes, and other debt obligations they have today. Anything short of that is mostly wishful thinking or throwing tax dollars at a non-viable solution. Also note that this doesn't help small business employees - I don't care how kind-hearted a business owner is, you can't pay employees when you're not making any money. Taking on giant loans to pay them is ridiculous - you're better off having the government pay them instead.
Loans help small businesses the same way it helps the large businesses to buy time / ride the crisis. You have a lengthy pay back period and the interest rate is zero - offers liquidity. Many small businesses have only 30- 60 days opex as cash.
Freezing the debt obligation helps too - but it is harder to implement that since there are many parties involved in that transaction.
Loans don't help small businesses the same way they do large ones because small businesses don't have the margins and market size to be able to pay them back in the future when things pick back up. They would get through this crisis and have the exact same financials they did before, except worse because now they've got a fat load of debt hanging on their balance sheets forever.
Yeah, loans sound like a way to help the loan giver out, rather than the business, and the stress it puts on their cash flow might end up stunting growth.