Shame the CFO for accepting government assistance




When the $2 trillion CARES stimulus bill passed congress, the finance chief forums were buzzing. CFOs had 2 questions: most of them asked how am i able to apply for this government assistance, which may be a critical lifeline for my company? But of these who asked about applying for the loan, over 30% also asked how am i able to accept this government assistance which may be seen as a humiliation to me? With the Payroll Protection Plan (PPP) money completely depleted and Congress battling to release more funds, do CFOs still have qualms about taking the funds?

For most CFOs, this is often the primary time they're considering government forgivable loans or grants. During the 2008 financial crisis, government support was focused on financial institutions and even within that sector, but 10% of banks received aid.

Some CFOs is also concerned with whether receiving financial assistance would put a negative mark on the company credit long-term and impact access to capital within the future. Others chafe at the restrictions included with the help including, a cap on executive salaries, limit on layoffs, restrictions on dividends and share buybacks, among others.

This is an incredible crisis and a time to think differently. Every company across sectors and regions is impacted. Goldman Sachs predicted 34% contraction in GDP with 15% unemployment. The exchange dropped almost 30% from its peak a month ago. About 70% of small businesses applied for the CARES act loan.

The size and nature of this government assistance is unprecedented. The CARES stimulus bill of over $2 trillion was the biggest ever, for any country. And it passed overwhelmingly with bipartisan support.

Most companies were in great financial shape at end of 2019. However, the entire loss in revenue, uncertainty about duration of the economic downturn and difficulty in accessing liquidity within the disturbed financial markets will challenge all companies. nobody should remember in 2021 and question why an organization accepted government assistance within the COVID-19 crisis.

CFOs have a legal duty to safeguard the interest of their shareholders. they ought to hunt for the simplest options to finance the corporate and assure liquidity to weather financial downturns.

CFOs have always made decisions supported understanding government policies and navigating companies to learn from favorable policies. No CFO has any doubts about taking a deduction for disbursal or recognizing a diminution for his or her R&D.

It’s true that taxpayers will ultimately shoulder the price of those government programs. However, companies that accept PPP will use those funds to pay employee salaries. Without those funds, many employees would be laid off and would apply for unemployment. Tax payers would purchase the unemployment benefits additionally.

The decision to use for stimulus under the CARES act should be supported good forecasting analysis on whether the corporate needs the extra emergency funding and what are the sources and options for funding.

In addition to the short-term consideration, there's also the long-term perspective of how the choice are viewed within the future. for several CFOs, the basics of capitalism are success through toil and fair competition. CFOs that do careful analysis and access government loans and accommodates the terms and enable their company to be positioned well for survival and success beyond the crisis will build a positive reputation for his or her company. Surely, there's no shame therein.