(Newswire.net — April 30, 2020) — Everywhere around the world, governments are desperately trying to save businesses in their country from bankruptcy. In the U.S., despite the $484 billion loan program, there has been a sharp increase in March of businesses filing under Chapter 11. What can we expect in the months to come?
Business Owners Are Crumbling under Mounting Debts
Attorneys for struggling companies are apprehending that some of them will decide shortly to file for bankruptcy. Even though billions of dollars have been injected in companies to come in relief of the coronavirus economic disaster, it seems as if it won’t be enough to counter the effects created by the lockdown inside the country.
Their mounting debt is simply becoming too large and the uncertainty of the after-pandemic is just too much to envision. Nobody knows when things will go back to normal, and lots of business owners are rather pessimistic about it. (For more news on business and finance: Animated Explanations)
Some Sectors Are More Vulnerable than Others
The first businesses to shut down were restaurants and retailers, already more than a month ago in some cases. They now find themselves with financial problems that keep growing. Even though some of the restaurants were able to continue their take-out and delivery services (or started one), it is very often not enough to compensate for the losses they have encountered from having to shut their doors to diners.
The smaller retailers are finding themselves with a whole winter collection that they won’t be able to sell, now that spring is in full swing and the weather keeps getting warmer. Even those with online stores were not able to generate enough business to save them from struggling financially. With a potential recession in front of them, both these sectors will also see newly unemployed people cut these types of spending first from their budget.
Even independent oil companies find themselves in trouble today because of the collapse in energy prices; an atypical situation which they were not ready to face. Add to this the companies that were already not doing well before the COVID-19 sanitary crisis and you have a disastrous picture of what the economy will have to deal with in the next few months.
Post-Coronavirus Measures
Many people believe the world will never be the same after this worldwide pandemic. At least temporarily, measures will have to be taken in order not to face a second and potentially deadlier wave. This will affect restaurants again as they will have to respect the new minimum distance between guests. That could see a reduction in seating capacity cut by more than half. If you add to that new factor the losses already incurred, it’s enough for restaurant owners to ask themselves if it is even worth it to try and reopen.
We have already seen larger companies having to shut their doors. True Religion, a famous jeans brand, filed for Chapter 11 this month and it looks like Neiman Marcus and J.C. Penney, department store chains, may follow suit in the days to come, as they were already struggling to survive before the COVID-19 meltdown.