Ask HN: Couple of ideas for saving small businesses. What do you think?
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How does giving businesses loans help exactly? You've just added debt to their financials without any corresponding increase in revenue to offset it, either now or in the future, and decreased their ability to take out more effective loans later. A small business simply cannot guarantee revenue streams to pay back giant loans after the current crisis is over, nor do they have the financial strength to weather an entire quarter or more of virtually no revenue.
If you want to save small businesses, you need to hit pause on all their bottom line costs until demand picks back up. That means freezing mortgage/rent payments, property taxes, and other debt obligations they have today. Anything short of that is mostly wishful thinking or throwing tax dollars at a non-viable solution. Also note that this doesn't help small business employees - I don't care how kind-hearted a business owner is, you can't pay employees when you're not making any money. Taking on giant loans to pay them is ridiculous - you're better off having the government pay them instead.
If you want to save small businesses, you need to hit pause on all their bottom line costs until demand picks back up. That means freezing mortgage/rent payments, property taxes, and other debt obligations they have today. Anything short of that is mostly wishful thinking or throwing tax dollars at a non-viable solution. Also note that this doesn't help small business employees - I don't care how kind-hearted a business owner is, you can't pay employees when you're not making any money. Taking on giant loans to pay them is ridiculous - you're better off having the government pay them instead.
Loans help small businesses the same way it helps the large businesses to buy time / ride the crisis. You have a lengthy pay back period and the interest rate is zero - offers liquidity. Many small businesses have only 30- 60 days opex as cash.
Freezing the debt obligation helps too - but it is harder to implement that since there are many parties involved in that transaction.
Freezing the debt obligation helps too - but it is harder to implement that since there are many parties involved in that transaction.
Loans don't help small businesses the same way they do large ones because small businesses don't have the margins and market size to be able to pay them back in the future when things pick back up. They would get through this crisis and have the exact same financials they did before, except worse because now they've got a fat load of debt hanging on their balance sheets forever.
Yeah, loans sound like a way to help the loan giver out, rather than the business, and the stress it puts on their cash flow might end up stunting growth.
I run an SMB. These things would be valuable for my business right now:
1. Grant for R&D projects. There is a lot we could do while WFH that would make our products better after this. It would be great to not need to worry about customers atm and just work on innovation.
2. Low/no interest loans for 3-6 months of expenses. We have a lot of outstanding receivables. All our customers are holding payment. We’ll get it later, but we need that cash now. We also have a lot of customer opportunities in the pipeline. Most of them won’t go away. But they will be 6-12 months delayed. But we’ll need the cash 3 months from now not 9-15 mo this from now.
1. Grant for R&D projects. There is a lot we could do while WFH that would make our products better after this. It would be great to not need to worry about customers atm and just work on innovation.
2. Low/no interest loans for 3-6 months of expenses. We have a lot of outstanding receivables. All our customers are holding payment. We’ll get it later, but we need that cash now. We also have a lot of customer opportunities in the pipeline. Most of them won’t go away. But they will be 6-12 months delayed. But we’ll need the cash 3 months from now not 9-15 mo this from now.
The government should just simply freeze all loans that affect these sectors.
Who would then get affected? Mostly rich rentier types and then the banks. The banks will be given super low interest rates from the fed to cover the shortfalls in interest from these loans.
Essential services like food/medicine production, etc should be given grants to fill in any production holes.
Who would then get affected? Mostly rich rentier types and then the banks. The banks will be given super low interest rates from the fed to cover the shortfalls in interest from these loans.
Essential services like food/medicine production, etc should be given grants to fill in any production holes.
Forgive all personal debts. That would stimulate demand side.
https://news.ycombinator.com/item?id=22658643
https://news.ycombinator.com/item?id=22658643
I suspect we are better off encouraging demand side with generous unemployment payments. Something that takes into account your income like UK. This can buffer the impact.
If I'm right in believing this will be an ongoing issue for at least 6 months and likely over a year then nothing is going to realistically save many businesses that have little revenue over these time frames. That said other business will do well like medical and home delivery groceries.
We need to protect people. It truely sux if someone loses their business through no fault of their own but what's important is make sure these people have some money ongoing after the fact. Then the economy will repair itself to the new reality, and again when a vaccine or other solution is found down the track.
Also I think making sure landlords and banks can't kick people outta homes and similar with utilities are important.
Further well likely need some dry power when this is over to kick-start the global economy.
...hard questions and who really knows.
If I'm right in believing this will be an ongoing issue for at least 6 months and likely over a year then nothing is going to realistically save many businesses that have little revenue over these time frames. That said other business will do well like medical and home delivery groceries.
We need to protect people. It truely sux if someone loses their business through no fault of their own but what's important is make sure these people have some money ongoing after the fact. Then the economy will repair itself to the new reality, and again when a vaccine or other solution is found down the track.
Also I think making sure landlords and banks can't kick people outta homes and similar with utilities are important.
Further well likely need some dry power when this is over to kick-start the global economy.
...hard questions and who really knows.
Is this for Mozilla "Save the internet" challenge? :D
It is often said there is not a practical way for govt to distribute money to SMBs. So they take the easy route of giving money to large companies.
1. What about SBA guarantees small business loans up to 3X of last federal tax paid by the company for 0% interest. The small business can repay the loan in 5 years.
2. If you want a more radical plan, give 6 months of payroll as a loan to every small business for 0%-0.25% interest. Payback period is 5 years.
These ideas are easy to implement, rewards good behavior and equitable.
What do you think?