Why do companies choose for state support rather than bank loans?

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Expert Solution

Well this question has no perfect answer but i will try to answer it with opinion.

Companies primary objective always is to earn profit and increase the wealth of their shareholders. So how they could do it is always in their mind.

So at times of crisis or in hard times they want support from goverments. It is because taking bank loans will definately hit their balance sheet and also the interest rate burden will always there. On the other hand an government support is always tax free or you can also say interest free. So they can think to rebuild themselves with that suppost as we could saw in 2008 crisis.

Also there is some different prespective also. Banks are also not so encouragious to give loans in hard times to a company due to risk of default by them. So It is governements only who can help by enhancing their fiscal spending and companies also more encouragious to take that grant for bailout of something.

In normal times, this theory may not be work because even if company want to take support from governments but there is not such huge. But still they prefer to go with governements schemes etc.

this is my opinion based answer.

please like my answer if you like it.

thanks

jeff jeffy answered 1 year ago

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