The COVID-19 pandemic is just beginning—but it is already having profound effects on many large businesses, which could lead to requests for federal government bailouts. Travel, hotel, and leisure industries have seen sharp declines in demand, and service sector activity is very likely to shrink dramatically. Businesses, and the people they employ, will be forced to adapt to falling revenues and will need to adapt to keep their doors open.
When self-help is insufficient, there are standard options for firms in trouble. They can borrow to get through cash flow problems. Or, when credit isn’t there, but the business is viable in the long run, they can ask for bankruptcy protection. Bankruptcy gives them time to execute any needed reorganization and make deals with those to whom they owe money. These options are the default policy stance toward businesses under financial stress.The above excerpt was originally published in Center for American Progress.