My understanding of economics and business is very limited, but to me it doesn't seem right that a business would need to take out a loan in order to pay its workers. Doesn't that money come from the business' profit? If the business isn't making enough profit to pay its workers, then shouldn't it have to either cut wages, lay people off, or go out of business because it sucks at making a profit?

What kind of loans are these places taking out to make their payroll? I mean really, what the fuck are Obama and McCain talking about? Is the loan market even frozen like they say it is? Why would a business that has supposedly been taking loans out for payroll for years (wtf?) and has good credit suddenly not be able to borrow any more money from a bank? I don't understand any of this shit.

it would happen for start-ups. but thats really about it.

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Its true. My consulting firm luckily has very good relations with bankers so we still have many good lines of credit, but my parents who own the company lost 70 grand in investments in the past three days.
Anyhow about the workers yeah small businesses need checks coming in all the time, especially consulting since its all people paid very highly on the hour. There often isn't enough in the given company's account to pay all their people at any given time, so they rely on loans to get their people paid until the next check comes in the mail.

Want a field that won't be fucked due to the depression? Construction for the government. Trust me on this

I think its mostly fear mongering. Obviously certain kinds of businesses need a flexible supply of capital to keep running efficiently (if you're producing engines or something and you get a big order you might not have enough cash onhand to have all the raw materials shipped to location etc.).

But it's not like all banks are suddenly out of money. Loans are how banks make money in the first place, so it doesn't really make sense that they would suddenly withhold giving any to people who have a legitimate need for the capital and a record of paying back their debts promptly.

Out of curiosity, who is quoted as saying that ? I'm wondering because it doesn't sound like a prepared statement; it sounds like something someone said off-the-cuff without thinking a lot about it.

It seems to me that any business trying to get a loan just to make payroll has greater issues to worry about.

A few points:

- Cash flows are not necessarily regular.
Even in a case where a customer buys something on store credit, while such a sale is registered as income, it isn't a positive cashflow until the store gets the money.
Employees unfortunately aren't as flexible.


- If, as is most cases, the business finances itself with debt as well as equity (so they've taken a loan), they may face big problems if they're unable to roll it over.

It's a bit of a problem because while it's all well and good paying interest on a loan, if when taking out the loan you had made the quite reasonable assumption that you'd be able to roll it over at maturity (ie: borrow the same amount again to cover the repayment of principal at the end of the loan) you could be caught in quite a spot.
The loan is due, suddenly you have to come up with the principal. If the initial loan went toward say, plant and equipment the business may need to sell off assets, which is going to suck a LOT if a many other people are doing the same.

I might add that bonds aren't like home loans. Generally the way you get a yield is that the issuer gets paid say... $90 at issue, and has to pay say... $100 at maturity. =
The interest yield is of course from the difference - in this case if it was for a year, 11.11%

Quite often debt is continuously rolled over, so in the example I just gave, at the end of the period they pay $10 that had been 'set a aside' and borrow $90 again when maturity comes and they owe $100.
This means that the borrower is in effect making regular payments of $11.11%

If the debt can't be rolled over, suddenly instead of needing to have $10 in hand, we need $100, (more realistic situation is that you can still borrow at shit rates, but you get the picture).

Debt does NOT exist in perpetuity.

Out of curiosity, who is quoted as saying that ? I'm wondering because it doesn't sound like a prepared statement; it sounds like something someone said off-the-cuff without thinking a lot about it.

It seems to me that any business trying to get a loan just to make payroll has greater issues to worry about.

I think I've heard both candidates say it, but I know for a fact Obama said it in last night's debate. That's what reminded me of it and why I made this thread.

edit: And a while back, McCain gave a specific example in some speech I happened to catch on CNN. Sonic fast food restaurants is no longer able to secure loans from GE Capital to renovate their restaurants. I can see how that might slow business down a bit for construction, but uhh...that also seems like a frivolous unnecessary business expense. It's not like Sonic is going to close, it's just that people will have to eat in buildings featuring 1980s and 90s decor rather than hip new shit, so who gives a fuck? Plus I'm sure there are more detailed reasons behind this than just OH NOES CRISIS.

I think I've heard both candidates say it, but I know for a fact Obama said it in last night's debate. That's what reminded me of it and why I made this thread.

edit: And a while back, McCain gave a specific example in some speech I happened to catch on CNN. Sonic fast food restaurants is no longer able to secure loans from GE Capital to renovate their restaurants. I can see how that might slow business down a bit for construction, but uhh...that also seems like a frivolous unnecessary business expense. It's not like Sonic is going to close, it's just that people will have to eat in buildings featuring 1980s and 90s decor rather than hip new shit, so who gives a fuck? Plus I'm sure there are more detailed reasons behind this than just OH NOES CRISIS.

... haha. I'm going to have to look that up, because maybe I just don't understand why he cares or thinks it's relevant. I cannot fathom anyone giving a shit about a single fast food chain as if it were the core of American industry rather than a luxury. After all, there's probably a thousand or more other fast food chains, each with 1804720821712 stores, some of them infesting the entire frickin planet.

Blagh.