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This is going to be an economic catastrophe unless there's somehow a nationwide bailout to literally all brick and mortar businesses. I know of several local ba

by eyegor 7y ago

This is going to be an economic catastrophe unless there's somehow a nationwide bailout to literally all brick and mortar businesses. I know of several local bar/restaurants that are considering shutting down for good, and a colleague near Melbourne told me of 4 that already have (I'm eastern US). Even if this all blows over in 3 months, we'll have a huge surge in homelessness and folks needing social assistance across the board.

castratikron 7y ago
A restaurant near me already laid off 20 and we aren't even that far into this. A lot of restaurants, bars, and gyms are operating close to the edge of insolvency as it is. Oh and by the way the timetable on the retail apocalypse just got pushed up to this week.
bthrn 7y ago
This is crazy to ponder given it’s only been a couple weeks. I feel terrible about so many smaller businesses teetering close to insolvency.
- tjr225 7y ago
  This is the exact problem with rampant “capitalism” and Raeganomics. This is where we end up. Bailouts for the rich and corporations and that’s it. Things seem great until they don’t. And then it’s go fuck yourself. No matter how conservative you are I ask you to look in the mirror and ask yourself if this is really how you want your kids to live.
- eyegor 7y ago
  It's less about insolvency and more about having a ton of savings. The entire business model is driven by customers, and they go from netting $2k/day to losing on salaries and rent. How long do you think a successful bar could survive hemorrhaging money on a daily basis, with no hopes of when customers would be allowed to return? What bank is going to write a loan that risky to keep them afloat?
  - icelancer 7y ago
    Give them what the government gives large industries: Bailouts and direct cash payments, plus a loan.
deleted 7y ago
[deleted]
hn_throwaway_99 7y ago
Totally agree. The bailout of the banks has started with 0% rates and massive QE, which at the end of the day while I think necessary to prevent a credit crisis will do nothing to help the real economic situation; demand is dead for a while because of the health situation. We should consider more radical measures like temporary rent/mortgage freezes.
- dragonwriter 7y ago
  > The bailout of the banks has started with 0% rates and massive QE, which at the end of the day while I think necessary to prevent a credit crisis Well, no, if you bailed out businesses and consumers directly, there also wouldn't be a credit crisis. Structurally, though, that's fiscal stimulus, which isn't the Feds job, and good luck getting much of that through Congress, and by that I mostly mean the Senate Republican Caucus. > We should consider more radical measures like temporary rent/mortgage freezes. While not that particular measure, a number of states and localities have adopted or are considering eviction and/or foreclosure bans, which leaves mortgage/rent technically due but limits nonpayment consequences.
  - smt88 7y ago
    HN's culture against partisan political statements looks particularly like sticking one's head in the sand these days. Coronavirus is not a political thing, but our (partisan) elected leaders had an enormous amount of power over how prepared we were, and their agendas shape the on-going response. It's impossible to talk accurately about the problem or solution without mentioning parties and politicians by name.
    - briandear 7y ago
      Are we going to blame politics on the Italian or other European countries’ responses too? What’s Italy’s excuse for being so unprepared? The simple fact is that partisanship is relevant: Democrats claimed travel bans were xenophobic however Taiwan issued one on Dec 31 and have very few cases. Denmark and Poland closed their borders. When Trump does it, it’s automatically “bad,” when Europe does it, it’s automatically good. That’s what we are dealing with. Trump could cure cancer and the Democrats and the media would turn it into a civil war. The US is actually doing really well with this right now, relatively speaking: look at Italy as an example. Their first case was Feb 20. The US’s first case was Jan 21. Yet Italy has a dramatically higher death rate, despite “better” healthcare.
cavisne 7y ago
Such a bailout is feasible. During the financial crisis houses were physically built and purchased without enough people with the income to cover the loan. The difference here is that there is no underlying financial issue. People will still want to go to restaurants and bars after this is over, and it will end.
- conductr 7y ago
  > The difference here is that there is no underlying financial issue. This is like looking at just the income statement as sign of business health. Balance sheet and cash flow are pretty important.
- mc3 7y ago
  What about solvency, and the knock on effect to creditors. They can't pay the booze supplier and they go out of business etc. This could go on for months. Most businesses don't make those sweet SaaS margins. Same for airlines.
  - cma 7y ago
    Other countries are doing loan payment, rent, and interest moratoriums, etc. We've built everything with growth as an underlying assumption with no ability to pause things and focus on essential services for a month or two and then start back up.
  - anigbrowl 7y ago
    Creditors can experience some of the pain that they normally inflict on others. They are not sacrosanct and are the least important parties in economic relations during an emergency. As normality is restored, they will have new opportunities during the ensuing large scale financial restructuring.
    - rtpg 7y ago
      The thing is that a lot of creditors (suppliers basically) are just other businesses. It’s not all bankers holding onto a bunch of debt obligations Probably ironically banks will be able to make even more money as people pull into credit lines to go over this hump
ncallaway 7y ago
Several restaurants in downtown Seattle have already closed. More will probably come over the next few weeks. As I expect this to largely continue to be a problem through summer the tourism industry in downtown is going to be hit very hard. The economic side of this is going to hit like a ton-of-bricks. It's going to be very painful, and we should do everything we can as a society to take care of those that are hit hardest by it.
- pbourke 7y ago
  The Alaska cruise season will likely not happen this year. The Canadian government has banned cruise ships from Canadian ports until 1 July. Legally, the foreign-flagged ships of major cruise lines must call at a foreign port between calls at US ports. All Alaska cruises call at Vancouver on their way from Seattle to Alaska. https://www.seattletimes.com/nation-world/canada-suspends-cruise-ship-tourism-which-could-shut-down-seattle-to-alaska-cruise-season-until-july/ https://www.seattletimes.com/nation-world/canada-suspends-cr...
  - na85 7y ago
    Maybe they'll sail under the US flag?
    - bgorman 7y ago
      Could they go to Russia?
      - iso947 7y ago
        Who do you think will be on the death boats?
    - diebeforei485 7y ago
      Then they'd have to pay U.S. wages and working conditions. Avoiding that is the whole reason they are foreign flagged.
amiga_500 7y ago
Suspend rent payments
- ken 7y ago
  Without work, I can’t make hours to keep my health insurance, so I’ll be forced to buy COBRA, which is just as expensive as rent. (Or I could risk going without, while living at this continent’s ground zero for a pandemic.) Entire industries are being shut down. There are no easy answers here.
  - o-__-o 7y ago
    Helicopter money to small businesses.
  - m0zg 7y ago
    Protip: COBRA is almost always more expensive than a comparable plan you can buy from an exchange. Often hundreds of dollars a month more expensive if you have a family.
    - omgwtfbyobbq 7y ago
      The only problem with getting a plan on an exchange is that you may need to satisfy a deductible again. YMMV of course. With COBRA I believe you can also pay your premium after the month it's due. This can be advantageous because you can opt to not pay for your last month before switching to another plan if you end up not using any services from your COBRA plan that month.
- pfranz 7y ago
  I'm curious how this works in practice? Rent pays for groundskeepers, repairs and maintenance, your landlord's income, insurance, etc. Mortgages seem more straightforward. You would still owe the original amount and are likely still accruing interest.
- mc3 7y ago
  New problem: debt secured on property investments to businesses.
chrisco255 7y ago
They announced $50 billion in SBA loans (up to $2 million per business) for small and medium businesses. Interest rate is 3.75%. These kind of funds will help a lot of businesses float through: https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-provide-disaster-assistance-loans-small-businesses-impacted-coronavirus-covid-19 https://www.sba.gov/about-sba/sba-newsroom/press-releases-me...
- o-__-o 7y ago
  Those numbers are atrocious. But if SBA is offering that I wonder what small business loans from banks will look like, 1-1.5%?
  - chrisco255 7y ago
    Atrocious? For an unsecured loan?
- icelancer 7y ago
  Loans? Not grants? While large businesses get quantitative easing, bailouts of airline industries, etc? Sounds about right. Also from the announcement, lol: "businesses with credit available elsewhere are not eligible" Ah, so if you can get credit elsewhere, you can't get our help, even if it's needed.
  - chrisco255 7y ago
    I haven't read about the QE4 plans. How will it work? This is just tip of the iceberg, now that this is declared national emergency, FEMA money and other sources are unlocked. Meanwhile, it's just the first week of things heating up to the point of these shut downs. Give the government time.
    - icelancer 7y ago
      >> Give the government time. They have time enough to shut down businesses in a snap of their fingers. I don't think it's too much to expect at least a basic outline of a remuneration plan at the same time. I do not see why we should give them time on one issue but not the other.
anigbrowl 7y ago
At least in California, there will be guidance about evictions and the plan is to provide housing for all 108,000 homeless people. Italy has frozen many financial/property/contractual relations and it's likely that this will spread to other jurisdictions.
chipotle_coyote 7y ago
I'm a little surprised that commercial landlords of businesses that are affected aren't stepping up to offer rent concessions. Yes, I get they don't want to take a hit -- but they're generally in much better positions to do so than restaurants and cafés that run on less than 5% profit margins during good times. (And, yes, I'm sure the more leftist and anti-capitalist out there will say "but are you really surprised?," and they'll absolutely have a point.)
- ehnto 7y ago
  It is your government's responsibility, local or federal I don't mind. This is why you pay taxes, to provide services to your citizens, one of which is disaster preparedness. I wouldn't be quick to put the burden onto businesses. If such a thing were mandated you would pretty quickly bankrupt a bunch of landlords who were not in the position to take it, and you would shift a bunch of property ownership to the banks, the consquences of which I am not sure of. It isn't so much about greed but rather responsibility. Is it really a businesses responsibility to take care of citizens? Shouldn't the government be doing that, and don't you pay them to do that? I know America is skewed a bit, having businesses provide you your healthcare probably confuses their role in society. But something is off if you feel we should turn to a commercial realtor for community support.
  - chipotle_coyote 7y ago
    I don't disagree with that, to be clear -- my thought is more that everyone is in this together. There's a lot of actions only a government can practically take, and others they would probably do better than private actors even if private actors could also do it. (Health insurance being a prime example.) But none of that precludes a landlord from giving businesses (and, of course, individuals and families) a rent break without waiting for the government to compel them to do so.
    - ehnto 7y ago
      You're certainly not wrong, and I've seen a number of instances where landlords are being lenient with rent to tenants which is certainly commendable.
nick_kline 7y ago
Calling Andrew Yang! Put up the bat signal.
pcurve 7y ago
definitely not just eatery. Someone I know work in retail front and interior design firm. Needless to say, they had to let go a few workers because many retail clients are putting all their projects on hold.
ehnto 7y ago
Australia already has an economic stimulus under way, but I am not sure how much it will help brick and mortar retail and hospitality.
djsumdog 7y ago
A lot of restaurants stay in the red for the first 3~5 years. I have a friend who just opened a brewery in Tennessee in December. They don't serve food; it's just beer, so they might be alright - but I should probably call and see how he's doing. I sure hope they've started bottling to canning. You'd hope owners would keep a buffer of either cash or loans/credit-line to last three months, but a lot of them starting up may not have that bootstrap capital. Restaurants that have been around for years with good management can probably weather a month or two. Even the best well restaurants are going to feel the strain if we go to month three.
- mattmanser 7y ago
  This time of year is the beginning of a slump past Mother's Day for restaurants too (at least in the UK). And they probably won't get much out of Mother's Day this year either. Coming out of the Xmas period, May, June, July looming which are low turnover periods. If you're already teetering, you're going to fail. The UK's had a lot of big chains shut down or scale back recently too, there was a big explosion in restaurants and bars about 5 years ago and the first round of losers happened over the last couple of years.

by eyegor 7y ago

castratikron 7y ago

A restaurant near me already laid off 20 and we aren't even that far into this. A lot of restaurants, bars, and gyms are operating close to the edge of insolvency as it is. Oh and by the way the timetable on the retail apocalypse just got pushed up to this week.

bthrn 7y ago

This is crazy to ponder given it’s only been a couple weeks. I feel terrible about so many smaller businesses teetering close to insolvency.

tjr225 7y ago
This is the exact problem with rampant “capitalism” and Raeganomics. This is where we end up. Bailouts for the rich and corporations and that’s it. Things seem great until they don’t. And then it’s go fuck yourself. No matter how conservative you are I ask you to look in the mirror and ask yourself if this is really how you want your kids to live.
eyegor 7y ago
It's less about insolvency and more about having a ton of savings. The entire business model is driven by customers, and they go from netting $2k/day to losing on salaries and rent. How long do you think a successful bar could survive hemorrhaging money on a daily basis, with no hopes of when customers would be allowed to return? What bank is going to write a loan that risky to keep them afloat?
- icelancer 7y ago
  Give them what the government gives large industries: Bailouts and direct cash payments, plus a loan.

deleted 7y ago

[deleted]

hn_throwaway_99 7y ago

Totally agree. The bailout of the banks has started with 0% rates and massive QE, which at the end of the day while I think necessary to prevent a credit crisis will do nothing to help the real economic situation; demand is dead for a while because of the health situation. We should consider more radical measures like temporary rent/mortgage freezes.

dragonwriter 7y ago
> The bailout of the banks has started with 0% rates and massive QE, which at the end of the day while I think necessary to prevent a credit crisis Well, no, if you bailed out businesses and consumers directly, there also wouldn't be a credit crisis. Structurally, though, that's fiscal stimulus, which isn't the Feds job, and good luck getting much of that through Congress, and by that I mostly mean the Senate Republican Caucus. > We should consider more radical measures like temporary rent/mortgage freezes. While not that particular measure, a number of states and localities have adopted or are considering eviction and/or foreclosure bans, which leaves mortgage/rent technically due but limits nonpayment consequences.
- smt88 7y ago
  HN's culture against partisan political statements looks particularly like sticking one's head in the sand these days. Coronavirus is not a political thing, but our (partisan) elected leaders had an enormous amount of power over how prepared we were, and their agendas shape the on-going response. It's impossible to talk accurately about the problem or solution without mentioning parties and politicians by name.
  - briandear 7y ago
    Are we going to blame politics on the Italian or other European countries’ responses too? What’s Italy’s excuse for being so unprepared? The simple fact is that partisanship is relevant: Democrats claimed travel bans were xenophobic however Taiwan issued one on Dec 31 and have very few cases. Denmark and Poland closed their borders. When Trump does it, it’s automatically “bad,” when Europe does it, it’s automatically good. That’s what we are dealing with. Trump could cure cancer and the Democrats and the media would turn it into a civil war. The US is actually doing really well with this right now, relatively speaking: look at Italy as an example. Their first case was Feb 20. The US’s first case was Jan 21. Yet Italy has a dramatically higher death rate, despite “better” healthcare.

cavisne 7y ago

Such a bailout is feasible. During the financial crisis houses were physically built and purchased without enough people with the income to cover the loan. The difference here is that there is no underlying financial issue. People will still want to go to restaurants and bars after this is over, and it will end.

conductr 7y ago
> The difference here is that there is no underlying financial issue. This is like looking at just the income statement as sign of business health. Balance sheet and cash flow are pretty important.
mc3 7y ago
What about solvency, and the knock on effect to creditors. They can't pay the booze supplier and they go out of business etc. This could go on for months. Most businesses don't make those sweet SaaS margins. Same for airlines.
- cma 7y ago
  Other countries are doing loan payment, rent, and interest moratoriums, etc. We've built everything with growth as an underlying assumption with no ability to pause things and focus on essential services for a month or two and then start back up.
- anigbrowl 7y ago
  Creditors can experience some of the pain that they normally inflict on others. They are not sacrosanct and are the least important parties in economic relations during an emergency. As normality is restored, they will have new opportunities during the ensuing large scale financial restructuring.
  - rtpg 7y ago
    The thing is that a lot of creditors (suppliers basically) are just other businesses. It’s not all bankers holding onto a bunch of debt obligations Probably ironically banks will be able to make even more money as people pull into credit lines to go over this hump

ncallaway 7y ago

Several restaurants in downtown Seattle have already closed. More will probably come over the next few weeks. As I expect this to largely continue to be a problem through summer the tourism industry in downtown is going to be hit very hard. The economic side of this is going to hit like a ton-of-bricks. It's going to be very painful, and we should do everything we can as a society to take care of those that are hit hardest by it.

pbourke 7y ago
The Alaska cruise season will likely not happen this year. The Canadian government has banned cruise ships from Canadian ports until 1 July. Legally, the foreign-flagged ships of major cruise lines must call at a foreign port between calls at US ports. All Alaska cruises call at Vancouver on their way from Seattle to Alaska. https://www.seattletimes.com/nation-world/canada-suspends-cruise-ship-tourism-which-could-shut-down-seattle-to-alaska-cruise-season-until-july/ https://www.seattletimes.com/nation-world/canada-suspends-cr...
- na85 7y ago
  Maybe they'll sail under the US flag?
  - bgorman 7y ago
    Could they go to Russia?
    - iso947 7y ago
      Who do you think will be on the death boats?
  - diebeforei485 7y ago
    Then they'd have to pay U.S. wages and working conditions. Avoiding that is the whole reason they are foreign flagged.

amiga_500 7y ago

Suspend rent payments

ken 7y ago
Without work, I can’t make hours to keep my health insurance, so I’ll be forced to buy COBRA, which is just as expensive as rent. (Or I could risk going without, while living at this continent’s ground zero for a pandemic.) Entire industries are being shut down. There are no easy answers here.
- o-__-o 7y ago
  Helicopter money to small businesses.
- m0zg 7y ago
  Protip: COBRA is almost always more expensive than a comparable plan you can buy from an exchange. Often hundreds of dollars a month more expensive if you have a family.
  - omgwtfbyobbq 7y ago
    The only problem with getting a plan on an exchange is that you may need to satisfy a deductible again. YMMV of course. With COBRA I believe you can also pay your premium after the month it's due. This can be advantageous because you can opt to not pay for your last month before switching to another plan if you end up not using any services from your COBRA plan that month.
pfranz 7y ago
I'm curious how this works in practice? Rent pays for groundskeepers, repairs and maintenance, your landlord's income, insurance, etc. Mortgages seem more straightforward. You would still owe the original amount and are likely still accruing interest.
mc3 7y ago
New problem: debt secured on property investments to businesses.

chrisco255 7y ago

They announced $50 billion in SBA loans (up to $2 million per business) for small and medium businesses. Interest rate is 3.75%. These kind of funds will help a lot of businesses float through: https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-provide-disaster-assistance-loans-small-businesses-impacted-coronavirus-covid-19 https://www.sba.gov/about-sba/sba-newsroom/press-releases-me...

o-__-o 7y ago
Those numbers are atrocious. But if SBA is offering that I wonder what small business loans from banks will look like, 1-1.5%?
- chrisco255 7y ago
  Atrocious? For an unsecured loan?
icelancer 7y ago
Loans? Not grants? While large businesses get quantitative easing, bailouts of airline industries, etc? Sounds about right. Also from the announcement, lol: "businesses with credit available elsewhere are not eligible" Ah, so if you can get credit elsewhere, you can't get our help, even if it's needed.
- chrisco255 7y ago
  I haven't read about the QE4 plans. How will it work? This is just tip of the iceberg, now that this is declared national emergency, FEMA money and other sources are unlocked. Meanwhile, it's just the first week of things heating up to the point of these shut downs. Give the government time.
  - icelancer 7y ago
    >> Give the government time. They have time enough to shut down businesses in a snap of their fingers. I don't think it's too much to expect at least a basic outline of a remuneration plan at the same time. I do not see why we should give them time on one issue but not the other.

anigbrowl 7y ago

At least in California, there will be guidance about evictions and the plan is to provide housing for all 108,000 homeless people. Italy has frozen many financial/property/contractual relations and it's likely that this will spread to other jurisdictions.

chipotle_coyote 7y ago

I'm a little surprised that commercial landlords of businesses that are affected aren't stepping up to offer rent concessions. Yes, I get they don't want to take a hit -- but they're generally in much better positions to do so than restaurants and cafés that run on less than 5% profit margins during good times. (And, yes, I'm sure the more leftist and anti-capitalist out there will say "but are you really surprised?," and they'll absolutely have a point.)

ehnto 7y ago
It is your government's responsibility, local or federal I don't mind. This is why you pay taxes, to provide services to your citizens, one of which is disaster preparedness. I wouldn't be quick to put the burden onto businesses. If such a thing were mandated you would pretty quickly bankrupt a bunch of landlords who were not in the position to take it, and you would shift a bunch of property ownership to the banks, the consquences of which I am not sure of. It isn't so much about greed but rather responsibility. Is it really a businesses responsibility to take care of citizens? Shouldn't the government be doing that, and don't you pay them to do that? I know America is skewed a bit, having businesses provide you your healthcare probably confuses their role in society. But something is off if you feel we should turn to a commercial realtor for community support.
- chipotle_coyote 7y ago
  I don't disagree with that, to be clear -- my thought is more that everyone is in this together. There's a lot of actions only a government can practically take, and others they would probably do better than private actors even if private actors could also do it. (Health insurance being a prime example.) But none of that precludes a landlord from giving businesses (and, of course, individuals and families) a rent break without waiting for the government to compel them to do so.
  - ehnto 7y ago
    You're certainly not wrong, and I've seen a number of instances where landlords are being lenient with rent to tenants which is certainly commendable.

nick_kline 7y ago

Calling Andrew Yang! Put up the bat signal.

pcurve 7y ago

definitely not just eatery. Someone I know work in retail front and interior design firm. Needless to say, they had to let go a few workers because many retail clients are putting all their projects on hold.

ehnto 7y ago

Australia already has an economic stimulus under way, but I am not sure how much it will help brick and mortar retail and hospitality.

djsumdog 7y ago

A lot of restaurants stay in the red for the first 3~5 years. I have a friend who just opened a brewery in Tennessee in December. They don't serve food; it's just beer, so they might be alright - but I should probably call and see how he's doing. I sure hope they've started bottling to canning. You'd hope owners would keep a buffer of either cash or loans/credit-line to last three months, but a lot of them starting up may not have that bootstrap capital. Restaurants that have been around for years with good management can probably weather a month or two. Even the best well restaurants are going to feel the strain if we go to month three.

mattmanser 7y ago
This time of year is the beginning of a slump past Mother's Day for restaurants too (at least in the UK). And they probably won't get much out of Mother's Day this year either. Coming out of the Xmas period, May, June, July looming which are low turnover periods. If you're already teetering, you're going to fail. The UK's had a lot of big chains shut down or scale back recently too, there was a big explosion in restaurants and bars about 5 years ago and the first round of losers happened over the last couple of years.