If COVID-19/Recession Businesses Fail, Why Not Open New One?

[kyphysics]

I've been reading various estimates on the number of small businesses that would fail due to a lengthy COVID-19/recession period.

One thing I don't get is why they cannot just open a new store/business after that? Is it really that devastating or difficult?

Let's say you open Joe's Taco Diner. You lose sufficient business to have to close. Okay, you lost out. But, I've read in the past that many people who have succeeded greatly in business had many failed first attempts (second, third, etc.). In this case, would it be that hard for Joe to go to a bank and get a loan to open Joe's Taco Cavern a year or two after his diner failed? And, if Joe could do it, wouldn't many others be able to as well?

Isn't it just replacing one restaurant with another one? (same for other businesses)

 

[DrClaude]

One thing I don't get is why they cannot just open a new store/business after that? Is it really that devastating or difficult?

Yeah. It's not like it costs money to start a business.

 

[PeroK]

Not to mention that you may have gone legally bankrupt and/or have debts to pay.

Ultimately, as an economy, it boils down to whether government, banks and investors have enough confidence to write off debts to allow the economy to continue.

Similarly that banks don't repossess the homes of people who cannot pay the mortgage. And, that people who cannot pay the rent don't get evicted.

 

[kyphysics]

You can get private investments too. Not just banks.

E.g., go to your circle of professional friends and borrow $ (a couple doctors here, a few engineers there, a handful of businessmen, etc.). You can give them equity or some other financial arrangement.

 

[PeroK]

You can get private investments too. Not just banks.

E.g., go to your circle of professional friends and borrow $ (a couple doctors here, a few engineers there, a handful of businessmen, etc.)

I don't know whether you are trolling, or really have no idea.

 

[kyphysics]

Yeah. It's not like it costs money to start a business.

Sure. But, that's how banks make money. They NEED to lend to make money for a big part of their business. They pocket the difference between their borrowing costs and the interest paid back on their loans.

If they don't lend, they don't make money either. Or, at least, not as much.

 

[kyphysics]

I don't know whether you are trolling, or really have no idea.

Absolutely not. It happens ALL THE TIME. If you're not in business, you don't know.

 

[kyphysics]

Granted, many people cannot do that, b/c of limited social network and/or they have bad ideas and no one trusts them, etc. However, the method of private lending is VERY common.

 

[Mark44]

Thread closed. The basic premise here is uninformed -- that is, if you have a business that goes broke, you can just start fresh with another one.

As has been pointed out, when a business fails, the owner is still responsible for debts incurred while the business was open. Filing for bankruptcy may eliminate some of the outstanding debts, but not all of them.

As to getting a loan to restart the business, when someone or some entity loans you money, they have a reasonable expectation of getting their money back, plus interest.