Canada Pressured To Give Businesses Free Money Instead Of Loans

[Economy 52,844]

https://www.bnnbloomberg.ca/rbc-ceo-businesses-need-help-in-forgivable-form-during-recovery-1.1443111

 

Increasing pressure from business community is pressuring Trudeau to offer more direct help to struggling businesses than just loaning money to businesses

 

Economists warn many companies especially small business mom and pop restaurants or salons already have a lot of debt and when they reopen they won't be at full capacity for a while and offering more debt will just take them over the edge anyway and accomplish nothing

 

While benefits to the people is usually free money (minus taxes) that is not usually the case for businesses and bailouts despite common belief and loans usually have to be payed back unless the Government provides help in the form of grants (which don't have to get payed back)

 

Canada is being urged to offer more free credit to businesses that are dying because bailouts as loans means many companies will fail anyway and then the Government won't see that money back regardless

[Webb7 438]

But I want government to help more airline sector since its big industry for economy... pls daddy Trudeau come safe gay monsters 

[Economy 52,844]

Just now, Webb7 said:

But I want government to help more airline sector since its big industry for economy... pls daddy Trudeau come safe gay monsters 

Are u the user who told me u worked at air Canada?

 

Anyway my general opinion on these kinds of things are that small and even medium sized businesses tend to be more vulnerable so they should be given priority in help

 

However I'm not totally against big Corporate bailouts no matter what either because there's circumstances where even large companies can't handle the crash

 

Given there's been almost no air travel and won't for a while, many companies will not survive without Government help

 

So a locked down economy is a situation where I think large Corporations should get help as well not just small ones

 

Also airlines may require free cash to survive as well like these economists are saying small businesses need. Loans that just add to debt are not gonna cut it in a downturn this severe

 

However I think conditions need to be put in place like restrictions on stock but backs and executive pay if they expect to get tax payers help to ensure it doesn't get wasted 

 

Canada has been doing good with conditions on bailouts. But most bailouts have been loans. That might work for some industries but I think small business restaurants and salons and same in the case of airlines they are gonna need some grants as well

[Economy 52,844]

@JustinTrudeau @OBEY @Florian @Teal Ambition @DeanWinchester @Luc @HorusRa2

 

Loans or grants?

 

I think the traditional bailouts in the form of loans and stock purchases is preferable in most cases so that tax payers don't have to be on the hook permanently

 

But in the case of the most affected businesses of all (small restaurants, independent hair salons and airlines in the case of larger companies) need some in the form of grants or else many won't survive

 

If they fail the Government can't collect the loans back and will loose it anyway and then what was the point of loaning out money if businesses fail anyway and Government looses the money?

 

They are saying 40% of restaurants in my Province are already facing bankruptcy now (the percentage being higher among independent family owned) 

[DeanWinchester 41,390]

14 minutes ago, Economy said:

@JustinTrudeau @OBEY @Florian @Teal Ambition @DeanWinchester @Luc @HorusRa2

 

Loans or grants?

 

I think the traditional bailouts in the form of loans and stock purchases is preferable in most cases so that tax payers don't have to be on the hook permanently

 

But in the case of the most affected businesses of all (small restaurants, independent hair salons and airlines in the case of larger companies) need some in the form of grants or else many won't survive

 

If they fail the Government can't collect the loans back and will loose it anyway and then what was the point of loaning out money if businesses fail anyway and Government looses the money?

 

They are saying 40% of restaurants in my Province are already facing bankruptcy now (the percentage being higher among independent family owned) 

Bit of both really, depending on the type of business and how many they employ. We need stimuli for th economy but the loans should also not ask for immediate payment.

[HEARTSTOP 3,154]

Loans.

Grants seem fine until you realize many businesses were already in debt and doomed before the pandemic. Many people will take advantage of financial help if there are no consequences for using it. And money, although mostly virtual, doesn't come from nothing. 

Yes, many businesses will file for bankruptcy. But after this all has passed, if those services were ever needed, they will come back in one form or another. Necessity makes oportunity. Even if you can't pay for the loans, and file for bunkruptcy, your name won't be clean if you try again. You won't have an easy time getting a new loan if you have history of not paying them.

Now, if the money is just granted, there will be no consequences to people who will use it to fix problems they created for themselves before the pandemic. And most of these cases would come from large companies that would need much more money to fix their debt than the common small business.

Here in Portugal there was a big scandal of government paying for a bankrupt bank's debt in full, and the next day the bank opened debt free with a new name and lots of investment behind as if nothing had happened before. Of course right after there were tax increases for everyone to compensate. People were outraged for sure. If it had been a strict loan, they wouldn't be able to reopen so easily with no consequences.

I'm all for loosening the payment conditions though, postponing dates etc.

[Economy 52,844]

2 minutes ago, DeanWinchester said:

Bit of both really, depending on the type of business and how many they employ. We need stimuli for th economy but the loans should also not ask for immediate payment.

I also think both depending on industry and size

 

There's companies in some industries especially large ones that are on reduced business now but can probably make do with the traditional loans

 

Definitely small restaurants, hair salons, airlines tho might need more generous help than loans tho. On top of that the loans are not usually interest free even when it's bailouts

[Economy 52,844]

1 minute ago, HEARTSTOP said:

Loans.

Grants seem fine until you realize many businesses were already in debt and doomed before the pandemic. Many people will take advantage of financial help if there are no consequences for using it. And money, although mostly virtual, doesn't come from nothing. 

Yes, many businesses will file for bankruptcy. But after this all has passed, if those services were ever needed, they will come back in one form or another. Necessity makes oportunity. Even if you can't pay for the loans, and file for bunkruptcy, your name won't be clean if you try again. You won't have an easy time getting a new loan if you have history of not paying them.

Now, if the money is just granted, there will be no consequences to people who will use it to fix problems they created for themselves before the pandemic. And most of these cases would come from large companies that would need much more money to fix their debt than the common small business.

Here in Portugal there was a big scandal of government paying for a bankrupt bank's debt in full, and the next day the bank opened debt free with a new name and lots of investment behind as if nothing has happened before. Of course right after there were tax increases for everyone to compensate. People were outraged for sure. If it had been a strict loan, they wouldn't be able to reopen so easily with no consequences.

That is true many businesses were already struggling

 

That being said profit margins in many Industries can be tight at no more than 5% to 10% of revenue. Even a company being responsible and saving a lot of their profits, that's 20 weeks (5 months) to save for every 1 week of gross expenses

 

Now they are entirely shut down for months... That's years worth of profits. Of course some expenses disappear when ur shut down and obviously won't be years... But my point is good businesses could end up failing too not just businesses that were already failing before

 

Another issue I have with this is that ur making it sound like new businesses will just pop up and take their place... New startups take a lot of time to pop up

 

One of the reasons (among others) that the 2008 crisis (and 1930s depression) had such a slow recovery is that the economic pain crossed a threshold where many businesses weren't just damaged or shrank like in a normal recession, but a good number outright were destroyed and gone

 

Businesses that are gone can't re-hire after when things stabalize and new businesses take time to take their place. So that makes the recovery slower afterwards

 

When were talking about 40% of restaurants facing bankruptcy (that's almost half) I think we're setting the standards too high by telling them they should of ran their business better. If that many are failing it's because the circumstances are too severe to manage

 

At least that's my take on it

 

 

[Benji 20,113]

I'm not sure what the other policies are.  If it was like the U.K. where the government is already paying people 80% of their wages and a lot of other money demanding responsibilities have been removed or minimised for businesses then I would say loans make more sense.  If you're unable to survive with that much help then your business probably wasn't going to survive long anyway

If businesses are still expected to stump up a lot of costs however I can understand why grants would be better because everyone can prepare for a rainy day but a literal closure of your business for months isn't a normal rainy day.

[HEARTSTOP 3,154]

1 minute ago, Benji said:

I'm not sure what the other policies are.  If it was like the U.K. where the government is already paying people 80% of their wages and a lot of other money demanding responsibilities have been removed or minimised for businesses then I would say loans make more sense.  If you're unable to survive with that much help then your business probably wasn't going to survive long anyway

If businesses are still expected to stump up a lot of costs however I can understand why grants would be better because everyone can prepare for a rainy day but a literal closure of your business for months isn't a normal rainy day.

Exactly, my post was also from the Portuguese perspective, where the government is helping the people directly with loosening responsabilities and paying their wages directly. That is supposed to keep the economy moving, providing money to the consumer, so the products and services can be consumed.

Delayed loans to businesses make sure that money will eventually find its way back, without putting direct pressure on the common citizen, which may already be struggling with unemployment and poverty.

[HEARTSTOP 3,154]

7 minutes ago, Economy said:

That is true many businesses were already struggling

 

That being said profit margins in many Industries can be tight at no more than 5% to 10% of revenue. Even a company being responsible and saving a lot of their profits, that's 20 weeks (5 months) to save for every 1 week of gross expenses

 

Now they are entirely shut down for months... That's years worth of profits. Of course some expenses disappear when ur shut down and obviously won't be years... But my point is good businesses could end up failing too not just businesses that were already failing before

 

Another issue I have with this is that ur making it sound like new businesses will just pop up and take their place... New startups take a lot of time to pop up

 

One of the reasons (among others) that the 2008 crisis (and 1930s depression) had such a slow recovery is that the economic pain crossed a threshold where many businesses weren't just damaged or shrank like in a normal recession, but a good number outright were destroyed and gone

 

Businesses that are gone can't re-hire after when things stabalize and new businesses take time to take their place. So that makes the recovery slower afterwards

 

When were talking about 40% of restaurants facing bankruptcy (that's almost half) I think we're setting the standards too high by telling them they should of ran their business better. If that many are failing it's because the circumstances are too severe to manage

 

At least that's my take on it

 

 

I made a final addendum before you replied, but basically I am for loosening payment conditions and delaying responsabilities, so businesses can recuperate at a slow pace.

[Economy 52,844]

11 minutes ago, Benji said:

I'm not sure what the other policies are.  If it was like the U.K. where the government is already paying people 80% of their wages and a lot of other money demanding responsibilities have been removed or minimised for businesses then I would say loans make more sense.  If you're unable to survive with that much help then your business probably wasn't going to survive long anyway

If businesses are still expected to stump up a lot of costs however I can understand why grants would be better because everyone can prepare for a rainy day but a literal closure of your business for months isn't a normal rainy day.

Yeah that's the thing. Shut down for months is literally not something anyone can be expected to prepare or save for

 

I'm talking about the businesses most directly affected of course. Some types of business have reduced revenue now but not completely 0

[Economy 52,844]

4 minutes ago, HEARTSTOP said:

I made a final addendum before you replied, but basically I am for loosening payment conditions and delaying responsabilities, so businesses can recuperate at a slow pace.

I agree with your general post exept the keeping money moving from consumer part

 

A lot of people say give money to consumer and they can spend it and it trickles upwards

 

But that would only work in normal circumstances. It does absolutely nothing to help businesses that are still shut down by order and the consumers can't spend their money there

 

But there's lots of angles to consider here and pros and cons. I'm certainly not saying I think ur opinion is wrong cuz I think u have totally valid points too