11 ms·

What I saw today driving through the neighboring small town - half of the main street shops and restaurants are closed. Not just temporarily, but the space is e

What I saw today driving through the neighboring small town - half of the main street shops and restaurants are closed. Not just temporarily, but the space is empty and there is a big "for rent" sign in the window. I've been going to some of those restaurants for decades - and now they are all but a memory. It is not enough to give corporations money for payroll - in NY large part of the cost of running business is the space itself. Also I don't understand all these "lending" programs - all they do is defer an even larger payment for later - most of the businesses will not be able to repay that if they have been closed for months. You are basically taking a loan to pay the rent so you can go bankrupt later. Doesn't make any sense. I don't know what to do but we need to give money and healthcare to people independent of work. Let businesses fail (big and small) and rebuild new ones once this blows over. Corporations will only buy back stocks and and line shareholders' pockets with dividends. Single digit percentage points of the stimulus money will reach employees. Bankruptcies aren't that bad - usually companies are not dissolved, but go through restructuring and gain a new management team (which one, knowing there is no bailout in the future, will plan better for emergencies like this one). What we are doing now is perpetuating corporate negligence that will now factor in 100% government bailout and run on even thinner margins and bigger stock price growth and dividends for the shareholders.

thawaway1837 6y ago
Individual bankruptcies are not bad. Mass bankruptcies are terrible.
- RhysU 6y ago
  Agreed. Most important thing is to flatten the bankruptcy curve.
jandrewrogers 6y ago
The forced economic shutdown has decimated the entrepreneurial class in the US, particularly small businesses, I anecdotally know of many (non-tech) examples in my own circle of friends. The jobs they created will not come back for the foreseeable future in many cases. It isn’t like they can just reboot with a clean slate, much of their capital was destroyed in the process. For a lot of businesses, “pausing” them is a death sentence, and there won’t be nearly as many people stepping up to replace them.
- capdeck 6y ago
  > there won’t be nearly as many people stepping up to replace them. Strongly disagree with the last point. If there is one lesson that I remember from the history of US -- entrepreneurial spirit is the reason this country exists in the first place. My only worry is that Google, Amazon and Facebook will use this time for huge land grabs in all niches. Many stores that closed have already been on their last legs. And in the digital realm there can only be one winner (try beating Amazon at online sales or Google in search...) So you are right in the sense that it will be even harder for many people to step up against the tech giants - but this is a whole different issue.
  - jandrewrogers 6y ago
    Sorry, but that is a naive view. If you destroy the life savings of half the people that had the courage and interest to start a business, you’ve removed them from the game. You can’t start a business with no money. Do you really believe in this environment that millions of people will suddenly have the newfound urge to invest all of their (depleted) life savings in a small business? Many of the businesses that closed were profitable businesses in every sense. The government essentially outlawed most small businesses but left the business owners holding all the liabilities of their business. Few small business owners are wealthy enough to eat that kind of loss. Imagine if the government unilaterally destroyed your house but left you with the mortgage. What are the odds that you can buy another house at that point? Pretty slim I’d say.
    - marcus_holmes 6y ago
      This assumes there's a choice. If there's no jobs to be had, then the choice is "sell stuff or starve". Not all small businesses need capital to start. And a lot that did start with capital didn't really need to (I've seen so many people rent an office as their first move, for a business they could easily run from home). To use your analogy: imagine if the government wrecked your house, but left you with the mortgage. You can't move anywhere, can't buy another place, can't rent anywhere. You'll have to rebuild from the rubble.
austhrow743 6y ago
>which one, knowing there is no bailout in the future, will plan better for emergencies like this one The government making your business illegal for multiple months is not an emergency businesses should have expected, or be expected to expect. >and run on even thinner margins and bigger stock price growth and dividends for the shareholders. Thinner margins, stock price growth, and dividends for shareholders are all good things that we want more of not less. It's also bullshit to call financial aid from the government, that's needed because of government action, a bail out. It's compensation.
- capdeck 6y ago
  It is true that current emergency is not the one to be expected. But it is made much worse for the people which depend on everything to come from the employer. If healthcare comes from a "job" - shouldn't the "job" anticipate pandemic in that case? Employers enjoy the benefits of employee's dependency during normal times, but the second things go sideways - they don't want to pay extra to guarantee medical coverage when it is needed the most. I agree on your second point but this is a flip side of market economy that we have all subscribed to - there are good times and bad. If capitalism is the way to go, then companies that can't survive (for whatever reason) should go under. This pandemic and government decisions affect everyone equally. Lets put our money where our mouth is. Otherwise we should switch to socialism and call it a day.
- samsonradu 6y ago
  > It's also bullshit to call financial aid from the government, that's needed because of government action, a bail out. No it’s not bullshit and it’s because of a pandemic mostly, very little because of government action. The government will make it legal again soon to open your business but many will still need aid for time to come because there will be less demand. Will we be subsidising empty restaurants, hotels and airplanes for an entire year or more because it is not ‘their fault’?
  - SpicyLemonZest 6y ago
    Probably, because if we don't then we'll face a shortage when demand for those things rebounds.
manigandham 6y ago
Small business failures aren't like tech startups where you can go raise a new VC round next week. Many people will have their livelihoods and retirements destroyed and can't even restart their existing business, let alone start something brand new. And that's assuming they don't get sick with the coronavirus.
millstone 6y ago
Driving downtown is apocalyptic, huh. Like nothing else. Feels like end of days. I will partially defend PPP here: the money is forgiven if "loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs." So it's more of a stipulated grant than a loan. As it should be. The failure of PPP is administrative. Congress authorized this much money: who gets it? The Small Business Administration was supposed to administer it, but they are not equipped to do so, so they delegated it to banks, which favored businesses with existing banking relationships. That's a stupid way to distribute a stupidly-small pot of money. I agree with "give money and healthcare to people independent of work" to the extent that this crisis continues. Congress should authorize enormous monies, and the Fed should commit to back it, until the infection rate declines to manageable levels. We can pay for it now or pay more for it later. I do not agree that "bankruptcies aren't that bad." I do not want my hometown's businesses to be "restructured." After this crisis, we will have an economy that is massively distorted towards delivery. Amazon is going to come out of this so much stronger than my neighborhood grocery store - but there was never a problem with that grocery store. "Corporate negligence" is a real issue: some authorized money may go to paying dividends, or executive bonuses, or other garbage, even while they impose layoffs. But if you impose oversight, you delay help to firms that really need it. One thing you can do is post-facto oversight: don't block spending, but let the American people know where the money was spent. And the CARES act sets that up pretty well.
amluto 6y ago
One solution could be some form of mandatory rent holiday, although it might already be too late. The sensible landlords should not be charging rent to their small business tenants right now. If the lose them all, then their properties will be worth considerably less when the dust settles.
- nickff 6y ago
  The property values are not going to be affected by any individual landlord, but keeping a reliable tenant may be extremely valuable during the recovery. Getting a good tenant is often difficult, and getting any tenant at all can be near-impossible in a recession.
- capdeck 6y ago
  Some landlords have mortgages to pay too - so in that case "rent holiday" is basically "landlord pays for tenant". But commercial real estate seems to be a different beast. I've witnessed a large amount of commercial property being empty for years at a time (5+) in a fairly expensive area of NY. Commercial landlords in this case probably owned the buildings outright and were in agreement to keep rents high even if it made it longer to find the next tenant. It probably is not like that everywhere, but I was really surprised that half of the building would just sit unoccupied for so long.
  - ryoshu 6y ago
    My naive understanding is that the empty storefronts offset as a tax loss from a more lucrative line of business from the matrixed holding company that owns the property. The empty storefront on 5th Ave. doesn't matter to the owners because the numbers work out on a spreadsheet.
    - WalterBright 6y ago
      Losses reduce the taxable income, they are not tax credits. If you're paying a 20% tax rate, you still lose 80% of those losses.
  - 6y ago
te_chris 6y ago
Yep, governments mistaking a solvency crisis for a liquidity crisis is going to kill lots of businesses that otherwise could’ve survived.
spdy 6y ago
> Bankruptcies aren't that bad - usually companies are not dissolved, but go through restructuring and gain a new management team (which one, knowing there is no bailout in the future, will plan better for emergencies like this one). That is what i was thinking lately too. We have bankruptcy procedures for a reason, big companies wont disappear they will be restructured and continue to exist and shareholders can decided with their pockets if they want to refinance a certain business. Going back to its intended way that "shareholder value" is a two way street. It cant always be sunny. Changing the incentive structure would benefit us all. And probably the best thing to get everything back on track is pumping money through the population and not single big entities.
NicoJuicy 6y ago
To be honest, I don't think the president would like the rent to be pardonned, like France is doing. It's too much loss for his private "business" and of his son in law.
- nightski 6y ago
  The current proposal in Congress reimburses landlords for their loss. It has stipulations though, such as a 5 year rent freeze.
  - NicoJuicy 6y ago
    Congress is housed by the democrats. Then it still has to be approved by the senate + signed by the president I presume. We'll c
    - nightski 6y ago
      Congress is the House and the Senate combined.
ta1234567890 6y ago
Completely agree with the sentiment and view of the situation. One nitpick, there are two types of bankruptcy for businesses, chapter 7 and chapter 11. Chapter 11 is for restructuring the business and keep it running, but it's very expensive (around $100k in legal fees in California), and it only really makes sense for businesses that have a decent outlook for the future, so it's mostly an option for mid/big-size businesses. Chapter 7 implies shutting down a business for good. Assets are liquidated and the business completely terminated. There are also big legal risks for the company owners/officials of starting the same or similar business again after bankruptcy, as they can be accused of fraud (basically mis-using chapter 7 to avoid debt liability to then continue pursuing the same business). Usually chapter 7 is the only real alternative to small businesses, and given the legal risks, it's unlikely they can come back to life afterwards. This crisis will be truly devastating for a lot of businesses.
iso1210 6y ago
> Not just temporarily, but the space is empty and there is a big "for rent" sign in the window. That's crazy. I can't imagine much demand for retail space at the moment, so why would a landlord kick out a previously good customer in order to let it go empty. Once places open back up, nobody is going to be opening new resturants any time soon, so rents will be way down on any new tenant.
- capdeck 6y ago
  > why would a landlord kick out a previously good customer I don't think they did. If I owned a small restaurant or a book store - having been closed for a month would be devastating in itself. Seeing no light at the end of the tunnel (another month to re-open, and then probably months of very few customers, on top of a crazy unemployment rate) I'd voluntarily cut my losses and settle with landlord to end the lease early. I'd assume that what had happened.
nitwit005 6y ago
There's no reason to pay rent if your lease expires. My current company has no office because the lease expired in the shutdown. There's no new office lined up, because they don't know when they'll need one.

thawaway1837 6y ago

Individual bankruptcies are not bad. Mass bankruptcies are terrible.

RhysU 6y ago
Agreed. Most important thing is to flatten the bankruptcy curve.

jandrewrogers 6y ago

The forced economic shutdown has decimated the entrepreneurial class in the US, particularly small businesses, I anecdotally know of many (non-tech) examples in my own circle of friends. The jobs they created will not come back for the foreseeable future in many cases. It isn’t like they can just reboot with a clean slate, much of their capital was destroyed in the process. For a lot of businesses, “pausing” them is a death sentence, and there won’t be nearly as many people stepping up to replace them.

capdeck 6y ago
> there won’t be nearly as many people stepping up to replace them. Strongly disagree with the last point. If there is one lesson that I remember from the history of US -- entrepreneurial spirit is the reason this country exists in the first place. My only worry is that Google, Amazon and Facebook will use this time for huge land grabs in all niches. Many stores that closed have already been on their last legs. And in the digital realm there can only be one winner (try beating Amazon at online sales or Google in search...) So you are right in the sense that it will be even harder for many people to step up against the tech giants - but this is a whole different issue.
- jandrewrogers 6y ago
  Sorry, but that is a naive view. If you destroy the life savings of half the people that had the courage and interest to start a business, you’ve removed them from the game. You can’t start a business with no money. Do you really believe in this environment that millions of people will suddenly have the newfound urge to invest all of their (depleted) life savings in a small business? Many of the businesses that closed were profitable businesses in every sense. The government essentially outlawed most small businesses but left the business owners holding all the liabilities of their business. Few small business owners are wealthy enough to eat that kind of loss. Imagine if the government unilaterally destroyed your house but left you with the mortgage. What are the odds that you can buy another house at that point? Pretty slim I’d say.
  - marcus_holmes 6y ago
    This assumes there's a choice. If there's no jobs to be had, then the choice is "sell stuff or starve". Not all small businesses need capital to start. And a lot that did start with capital didn't really need to (I've seen so many people rent an office as their first move, for a business they could easily run from home). To use your analogy: imagine if the government wrecked your house, but left you with the mortgage. You can't move anywhere, can't buy another place, can't rent anywhere. You'll have to rebuild from the rubble.

austhrow743 6y ago

>which one, knowing there is no bailout in the future, will plan better for emergencies like this one The government making your business illegal for multiple months is not an emergency businesses should have expected, or be expected to expect. >and run on even thinner margins and bigger stock price growth and dividends for the shareholders. Thinner margins, stock price growth, and dividends for shareholders are all good things that we want more of not less. It's also bullshit to call financial aid from the government, that's needed because of government action, a bail out. It's compensation.

capdeck 6y ago
It is true that current emergency is not the one to be expected. But it is made much worse for the people which depend on everything to come from the employer. If healthcare comes from a "job" - shouldn't the "job" anticipate pandemic in that case? Employers enjoy the benefits of employee's dependency during normal times, but the second things go sideways - they don't want to pay extra to guarantee medical coverage when it is needed the most. I agree on your second point but this is a flip side of market economy that we have all subscribed to - there are good times and bad. If capitalism is the way to go, then companies that can't survive (for whatever reason) should go under. This pandemic and government decisions affect everyone equally. Lets put our money where our mouth is. Otherwise we should switch to socialism and call it a day.
samsonradu 6y ago
> It's also bullshit to call financial aid from the government, that's needed because of government action, a bail out. No it’s not bullshit and it’s because of a pandemic mostly, very little because of government action. The government will make it legal again soon to open your business but many will still need aid for time to come because there will be less demand. Will we be subsidising empty restaurants, hotels and airplanes for an entire year or more because it is not ‘their fault’?
- SpicyLemonZest 6y ago
  Probably, because if we don't then we'll face a shortage when demand for those things rebounds.

manigandham 6y ago

Small business failures aren't like tech startups where you can go raise a new VC round next week. Many people will have their livelihoods and retirements destroyed and can't even restart their existing business, let alone start something brand new. And that's assuming they don't get sick with the coronavirus.

millstone 6y ago

Driving downtown is apocalyptic, huh. Like nothing else. Feels like end of days. I will partially defend PPP here: the money is forgiven if "loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs." So it's more of a stipulated grant than a loan. As it should be. The failure of PPP is administrative. Congress authorized this much money: who gets it? The Small Business Administration was supposed to administer it, but they are not equipped to do so, so they delegated it to banks, which favored businesses with existing banking relationships. That's a stupid way to distribute a stupidly-small pot of money. I agree with "give money and healthcare to people independent of work" to the extent that this crisis continues. Congress should authorize enormous monies, and the Fed should commit to back it, until the infection rate declines to manageable levels. We can pay for it now or pay more for it later. I do not agree that "bankruptcies aren't that bad." I do not want my hometown's businesses to be "restructured." After this crisis, we will have an economy that is massively distorted towards delivery. Amazon is going to come out of this so much stronger than my neighborhood grocery store - but there was never a problem with that grocery store. "Corporate negligence" is a real issue: some authorized money may go to paying dividends, or executive bonuses, or other garbage, even while they impose layoffs. But if you impose oversight, you delay help to firms that really need it. One thing you can do is post-facto oversight: don't block spending, but let the American people know where the money was spent. And the CARES act sets that up pretty well.

amluto 6y ago

One solution could be some form of mandatory rent holiday, although it might already be too late. The sensible landlords should not be charging rent to their small business tenants right now. If the lose them all, then their properties will be worth considerably less when the dust settles.

nickff 6y ago
The property values are not going to be affected by any individual landlord, but keeping a reliable tenant may be extremely valuable during the recovery. Getting a good tenant is often difficult, and getting any tenant at all can be near-impossible in a recession.
capdeck 6y ago
Some landlords have mortgages to pay too - so in that case "rent holiday" is basically "landlord pays for tenant". But commercial real estate seems to be a different beast. I've witnessed a large amount of commercial property being empty for years at a time (5+) in a fairly expensive area of NY. Commercial landlords in this case probably owned the buildings outright and were in agreement to keep rents high even if it made it longer to find the next tenant. It probably is not like that everywhere, but I was really surprised that half of the building would just sit unoccupied for so long.
- ryoshu 6y ago
  My naive understanding is that the empty storefronts offset as a tax loss from a more lucrative line of business from the matrixed holding company that owns the property. The empty storefront on 5th Ave. doesn't matter to the owners because the numbers work out on a spreadsheet.
  - WalterBright 6y ago
    Losses reduce the taxable income, they are not tax credits. If you're paying a 20% tax rate, you still lose 80% of those losses.
- 6y ago

te_chris 6y ago

Yep, governments mistaking a solvency crisis for a liquidity crisis is going to kill lots of businesses that otherwise could’ve survived.

spdy 6y ago

> Bankruptcies aren't that bad - usually companies are not dissolved, but go through restructuring and gain a new management team (which one, knowing there is no bailout in the future, will plan better for emergencies like this one). That is what i was thinking lately too. We have bankruptcy procedures for a reason, big companies wont disappear they will be restructured and continue to exist and shareholders can decided with their pockets if they want to refinance a certain business. Going back to its intended way that "shareholder value" is a two way street. It cant always be sunny. Changing the incentive structure would benefit us all. And probably the best thing to get everything back on track is pumping money through the population and not single big entities.

NicoJuicy 6y ago

To be honest, I don't think the president would like the rent to be pardonned, like France is doing. It's too much loss for his private "business" and of his son in law.

nightski 6y ago
The current proposal in Congress reimburses landlords for their loss. It has stipulations though, such as a 5 year rent freeze.
- NicoJuicy 6y ago
  Congress is housed by the democrats. Then it still has to be approved by the senate + signed by the president I presume. We'll c
  - nightski 6y ago
    Congress is the House and the Senate combined.

ta1234567890 6y ago

Completely agree with the sentiment and view of the situation. One nitpick, there are two types of bankruptcy for businesses, chapter 7 and chapter 11. Chapter 11 is for restructuring the business and keep it running, but it's very expensive (around $100k in legal fees in California), and it only really makes sense for businesses that have a decent outlook for the future, so it's mostly an option for mid/big-size businesses. Chapter 7 implies shutting down a business for good. Assets are liquidated and the business completely terminated. There are also big legal risks for the company owners/officials of starting the same or similar business again after bankruptcy, as they can be accused of fraud (basically mis-using chapter 7 to avoid debt liability to then continue pursuing the same business). Usually chapter 7 is the only real alternative to small businesses, and given the legal risks, it's unlikely they can come back to life afterwards. This crisis will be truly devastating for a lot of businesses.

iso1210 6y ago

> Not just temporarily, but the space is empty and there is a big "for rent" sign in the window. That's crazy. I can't imagine much demand for retail space at the moment, so why would a landlord kick out a previously good customer in order to let it go empty. Once places open back up, nobody is going to be opening new resturants any time soon, so rents will be way down on any new tenant.

capdeck 6y ago
> why would a landlord kick out a previously good customer I don't think they did. If I owned a small restaurant or a book store - having been closed for a month would be devastating in itself. Seeing no light at the end of the tunnel (another month to re-open, and then probably months of very few customers, on top of a crazy unemployment rate) I'd voluntarily cut my losses and settle with landlord to end the lease early. I'd assume that what had happened.

nitwit005 6y ago

There's no reason to pay rent if your lease expires. My current company has no office because the lease expired in the shutdown. There's no new office lined up, because they don't know when they'll need one.