Government bailouts should come with very onerous conditions so they are used only as last resort. But I guess 2008 should have taught us that this is not going to happen.
Government bailouts should be in the form of stock purchases. Want a bailout? Government owns part of the company. Want to issue dividends after the bailout? Government gets some. Too many bailouts, and the company is now state-owned.
taking equity seems to pop up with every story on corporate bailouts.
the problem with taking equity is that it's not simply an income stream, it's a responsibility. you become a stakeholder and need to manage the asset lest it devalue in ways you don't like. it's messy and much more criticizable, something politicians and bureaucrats loathe.
fixed-income assets like loans are much simpler, and have the added benefit of naturally having higher liquidation preference (bondholders get paid before shareholders).
loans with performance penalties/incentives are cleaner to implement, but the problem there is lobbying that waters down penalties and magnifies incentives.
there's no simple solution, including taking equity. i'd love every loan to have a clause stipulating no executive stock incentives or share buy-backs for 7 years post-loan, but no one is lobbying for that.
Loan means the company will be required to pay it back at some point. Suddenly increasing a company's liabilities by millions or billions, not to mention the interest burden, might have major significance for the long-term survivability of said company. That's fine if you only care about easing the short-term shock of the lockdown, but it could very well slow down the post-lockdown recovery.
And what happens when you require a bailout because the government forcefully shut down the economy? You need to critically think about what you are offering up as a solution.
When we were talking about being shut down for 2 weeks, this position made some sense. There are lots of reasons a company might face a 2 week disruption of operations, and it's fair to say an inability to tolerate it represents some real and avoidable fragility.
We're now a month and a half in, and some states have committed to broad mandatory shutdowns for another month. "Our business becomes illegal through the end of Q2" is not the kind of rainy day businesses can be reasonably expected to plan for.
i'd buy that argument for small businesses (<~$10MM in revenue), but for larger businesses (>$100MM) in most industries, a 6-month operational cushion isn't usually onerous, especially given the advantageous cost of capital generally afforded large businesses already.