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Spreading 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

Spreading 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 ago
It 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 ago
  It 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 ago
      I 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.
      - imtringued 7y ago
        You're forgetting that businesses can jack up prices after a crisis. Let's say there are 10 restaurants. One of them survives because it has taken a loan and others just crumble. Suddenly all the competition is gone and people are storming your place.
HammockTester 7y ago
I'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 ago
You do know what they would prefer, you just can't accept that there are other ways of humans relating to each other than usury

Spreading 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 ago

It 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 ago
It 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 ago
    I 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.
    - imtringued 7y ago
      You're forgetting that businesses can jack up prices after a crisis. Let's say there are 10 restaurants. One of them survives because it has taken a loan and others just crumble. Suddenly all the competition is gone and people are storming your place.

HammockTester 7y ago

I'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 ago

You do know what they would prefer, you just can't accept that there are other ways of humans relating to each other than usury