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The government has talked about bailouts for various industries from airlines, to cruise ships, to shale companies. But almost every sector of the US economy i
by slg 7y ago
The government has talked about bailouts for various industries from airlines, to cruise ships, to shale companies. But almost every sector of the US economy is going to be hit by this and I have no idea how we are going to react. Will there be a restaurant bailout? What would that even look like? It is much easier to work on bailing out a handful of airlines but how do you handle it for literally thousands of small businesses?
- thedogeye 7y agoSBA just announced a program for loans up to $2M at 3.75% to make payroll
- slg 7y agoLoans don't solve this. It isn't like once this is over restaurant patronage will jump up to 200% of normal. This is business these companies will never get back. Giving them a loan that they can't repay is just delaying the problem.
- dillondoyle 7y agoprobably with compounding interest if they allow deferred payments lol
- mech1234 7y agoSpreading the problem out over a long period of time keeps the company in business. It's a no-brainer good idea for the SBA to do this. Not sure what you would prefer instead.
- slg 7y agoIt is like CPR. It is better than doing absolutely nothing and gives extra time for more extreme measures, but on its own it is just delaying the inevitable.
- mech1234 7y agoIt is not delaying the inevitable. There will be many profitable restaurant businesses who find their business lacking liquid cash over the next few months. Being thrown a credit lifeline means that they can make it through this period of time and come out on the other side as a profitable business again. Paying down the debt is a common business practice that people do all the time. Throwing out a credit lifeline can be a practice that benefits everyone in times of crisis.
- slg 7y ago>There will be many profitable restaurant businesses who find their business lacking liquid cash over the next few months Like I said in my earlier comment, the best hope for these businesses is to return to normal revenue numbers. They aren't going to make up for the business they are currently losing. They don't have a liquidity problem. They have a lost revenue problem. They are still accruing costs without accruing revenue. Delaying those costs doesn't fix that disconnect. >Paying down the debt is a common business practice that people do all the time. Taking on debt to allow you to make investments and improve future outlook is a smart business decision. Taking on debt in order to meet recurring operating costs rarely works out when there is no hope of future growth.
- smallgovt 7y agoI think you're overestimating the magnitude of lost revenue. We're talking about 1 month of lost revenue. A profitable restaurant's unit model might be: 10% net profit, 30% COGS, 30% fixed cost, 30% labor cost During this one month shutdown, the restaurants won't incur labor cost or COGS. So, they're really only in the hole 30% of one month's revenue. With a little back of the envelope math, you'll see that the restaurant owner can pay back a loan for this amount by allocating 10% of their monthly profits (or 1% of monthly revenue) to loan payback. Now, if the restaurant is NOT profitable, then we have a problem. But, they were probably going to go out of business soon anyways in that case.
- 7y ago
- HammockTester 7y agoI'll take a crack at it. I would prefer commercial rent abatements combined with commercial property tax abatements. The same would make sense for residential as well. Unemployment payments should be increased and restaurants should temporarily lay off staff as needed.
- stainforth 7y agoYou do know what they would prefer, you just can't accept that there are other ways of humans relating to each other than usury
- ghouse 7y agoDoesn't "delay" the problem -- it exacerbates the problem.
- linuxftw 7y agoI'm assuming the loans are to make payroll for work already done. Many businesses don't have the cash on hand to pay for the work that was already done, they're relying on revenue from that work or past work that is now being paid to pay their employees. Frankly, I think the restaurant industry is over built and many of them deserve to close. The margins are non existent, most of the food is terrible, it's the ultimate bubble economy business.
- GarrisonPrime 7y agoActually, yes, once this is over it's reasonable to assume restaurant patronage will see a huge surge beyond prior levels, at least for a time.
- imtringued 7y agoOk, shut that business down then. Layoff all workers. If all you can think about is profit at the expense of everyone else then this is the course of action. I personally am in favor of solving a liquidity crisis with liquidity but well if people want to throw a wrench in the gears that's fine with me.
- spookthesunset 7y agoThe problem with loans are you have to repay them. Giving out loans as a social safety net is a cruel joke. It just makes people worse off in the long run.
- jfim 7y agoZero percent interest loans over a long enough repayment period (eg. ten years) would work though. It allows spreading the immediate loss in sales over a much longer period. Not that it would happen though.
- Ensorceled 7y agoFor restaurant owner running on 3-5% margins, when salaries are a significant expense, it would be suicide to take a loan to make payroll; your business would probably never be profitable again. Better to let the business die and reinvent yourself in June/July.
- acid__ 7y agoYes, better from a personal standpoint, but jeez, from a humanitarian perspective, can you really blame any restaurant owner from wanting to make payroll at any cost so that their employees can continue to feed themselves, pay rent, and take care of their loved ones?
- vharuck 7y agoThe employees should be able to apply for unemployment payments from the state. Which can a problem on its own, to be sure, but an employer doesn't have to bear the weight of lives all by him or herself.
- Ensorceled 7y agoMy point is why are we putting them in this position? How about a GRANT instead of a loan? The restaurant is TOAST when the loan starts being due as they try to reopen in the middle of recession after a forced closing and they'll all be out of work trying to feed themselves, pay rent and take care of their loved ones.
- GarrisonPrime 7y ago>How about a GRANT instead of a loan? You mean free money, just because? How could you even begin to figure out who deserves it? That'd be a lot of offices and bureaucracy to set up to solve the question. Unless you just want to give wads of cash to any restaurant claiming to need help, in which case I'm glad you're not leading the economy.
- int_19h 7y agoAt that point, you might as well just give that money directly to the restaurant owner, and all the employees, for the duration of the crisis.
- gwd 7y ago> Will there be a restaurant bailout? Maybe it could be like farm subsidies, but we pay restaurants to close for a certain amount of time / certain days of the week, on the condition that they pay employees normal wages for those days.
- inetknght 7y ago> on the condition that they pay employees normal wages for those days. "Normal wages" for many restaurant workers in the U.S. exclude tips. Without tips, "normal wages" is below the minimum wage. While it might better than nothing, it's not liveable.
- vonmoltke 7y ago> "Normal wages" for many restaurant workers in the U.S. exclude tips. Without tips, "normal wages" is below the minimum wage. Restaurants are required to bump tipped employees up to the non-tipped minimum wage if the tips don't put them over it. Thus, "normal wages" in this case would be the non-tipped minimum wage.
- beeforpork 7y agoWhat a bizarre interpretation of 'minimum wage' and 'tip'! This means that the restaurant owner essentially collects (part of) the tips? So you could employ a restaurant worker at $0/h and then bump them to minimum wage, because the tips will never cut it? Basically, you'd be collecting all the tips? This cannot seriously be legal!?
- lordnacho 7y agoWhat they need to do is provide everyone with restaurant vouchers paid for by the government. Then we can all have a big meal after this is over and keep our favourite eateries alive.
- robocat 7y agoAnd how do the restaurant staff pay for food and shelter in the meantime?
- lordnacho 7y agoIf it's known that restaurants will get paid eventually, it makes it easier to finance. I guess it's still not gonna be easy to stay afloat. The staff will need a handout. Either special law or they get unemployment. Not sure.
- baby 7y agoUBI is honestly the only solution here.
- citilife 7y agoPrinting money and giving it to everyone essentially taxes every dollar by the same amount. That's not necessarily the best solution here.
- pavas 7y agoIn the end the money for UBI comes from taxes one way or another. Even if every dollar is taxed the same amount, not everyone makes the same amount of dollars.
- cycrutchfield 7y agoHow about something a bit more targeted? Do we really need to give software engineers working from home extra cash?
- fma 7y agoThat software engineer would spend it elsewhere in the industry, likely some non-essential. That hourly worker w/o a job will pay rent and food. Software engineer...a carwash, new lawn equiment, or hell even a vacation. Giving an airline a tax break won't drive them more customers. Giving their customers more money will give them customers.
- cycrutchfield 7y agoWhat? Nobody is going to be flying anywhere soon, regardless of whether you give everybody $1000.
- fma 7y ago$1000 a month per person...Trump has announced at least 2 months of it. I have my salary still. My wife and I get $4000 of free money. What do you think we're going to do with it? You need to think long term what this money can do.
- omegaworks 7y agoThey need a moratorium on rent, mortgage and property taxes. Temporarily suspend base operating costs, and provide direct assistance for employees. Loans will help them bounce back when the crisis is over. Makes no sense right now.
- rosybox 7y agoThe WSJ Editorial Board has suggested that the Fed create a new facility that gives very cheap loans to businesses that need them. These loans will not need to be repaid right away and should sustain any business that needs it during this period. It sounded workable. https://www.wsj.com/articles/financing-an-economic-shutdown-11584399753 https://www.wsj.com/articles/financing-an-economic-shutdown-...
- jborichevskiy 7y agoNot an economist (just trying to understand all this) but wouldn’t this just be kicking the can down the road? I understand how loans and credit works in healthy markets/seasons but to me this feels like making a bet that these businesses would be able to take this infusion, weather out the storm, and then raise profits enough above what they were before to pay it all back. It’s fundamentally different from me starting a small business and going to Chase saying, look here’s a healthy prospect and I’ll be able to pay it back within x years.
- whatshisface 7y agoIf you can kick the can down the road until the virus goes away, you just saved the whole economy. The ability of my local Chinese place to serve customers is undiminished, my desire to eat Chinese food is undiminished, and all that's in the way is an ultimately temporary law.
- jborichevskiy 7y ago> The ability of my local Chinese place to serve customers is undiminished, my desire to eat Chinese food is undiminished, and all that's in the way is an ultimately temporary law. Agreed on this. But the rent paid out during the period of reduced revenue coming in creates a delta that this loan is filling in. The loan still needs to be paid back (even assuming 0% interest). That extra money needs to come from somewhere: increased prices, increased traffic, or decreased expenditures.
- 7y ago