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Easing the pain for small businesses

January 14, 2009

The government has unveiled a plan to guarantee up to 20 billion pounds of loans to help small businesses survive the credit crunch.

But there are concerns that will not be enough to get the banks lending sufficient funds to help businesses get access to cash.

The Conservatives want ministers to go further and underwrite 50 billion pounds of loans.

Some businesses are sceptical about the government’s plan. They say they have applied for these loans in the past and have found the caveats to be a deterrent.

What do you think of the plan? Are you the owner of a small business that has found the banks less than helpful? Tell us of your experiences.

Comments

When are the credit card companies going to reduce their interest rates, people need to be able to pay them off and have credit limits reduced to have any chance of recovering from the burden of debt.

Posted by Jennie Williams | Report as abusive
 

The credit crunch precipitated the recession. Freeing up credit will not of itself restore business confidence or create demand. Will businesses saddle themself with more debt (no matter how cheap) to make a service or more product available when demand and confidence have gone out of the market. Surely thats trying to fill the bath up by turning up the taps rather than providing whats needed, a plug. Jennie’s point is a good one in a way, because ultimately demand comes from us the public and if consumer credit is high it stifles demand.

Posted by Paul Jacob | Report as abusive
 

While I think it necessary that businesses are offered an alternative source of finance than that offered by the ravaged banking sector, I see this initiative as evidence of wholesale economic failure… Not a positive move to rebuild – but, rather, another sticking plaster to try and avoid some of the worst consequences of the withdrawal of credit from business.

This scheme is fundamentally flawed… where borrowers are deemed creditworthy, banks provide credit. Where borrowers are not deemed creditworthy, how do we expect the government to identify which borrowers are a safe risk? Will the rate of interest be small – making it sensible for any business with debt to borrow from the scheme and cut their commercial liabilities? Will shareholders/owners trust the government not to alter the terms after borrowers commit (rather like their U-turn on student loans when peppercorn interest rates were replaced with commercial ones?)

My anticipation is that the undocumented criteria to qualify for this money will be to keep a number of people in employment. I think the main purpose of this initiative is to keep unemployment numbers down – even if this costs more in un-recoverable debts of bankrupt companies than it would cost to service benefit payments. If this is the case, this facility will prove to be bureaucratic waste of time for companies that should be solvent – while presenting a black hole for government funds when they are lent to borrowers identified by political agendas. The simple fact that the loans are to business strongly suggests that this initiative won’t fundamentally affect economic demand – which, incidentally, is plummeting.

One initiative alone can improve our situation: a full audit of both the banking and shadow banking systems; strict, stringent, clear and simple legislation – and a concerted effort to hold shareholders and debtors responsible. Only once the bankruptcies have been admitted can we move on from our current sorry state of affairs.

Posted by Steve | Report as abusive
 

The faults of the last ten years of fear free borrowing are quite simply there was too much of it,at all levels of society and business and government.All I’ve heard from politicians and commentators is a variation on the drunks promise of drying out starting tomorrow.But people and businesses are already quiety amending their financial behaviour by becoming either sensible by choice or coercion,only those big mouthed sharp elbowed leaders of ours are still promoting more borrowing,they are cruelly misleading for most ordinary people.Of course the hopeless and the feckless will go back to the fountain for more debt but the vast majority of the economically active will continue as they have now begun to be by gearing back and riding out whatever will happen and be better for it.I look forward to statistical proof of the failure of this government initiative and the others which have been promised as the mass of personal decisions take effect and improve our economy naturally over time albeit taking us long past Browns failure to be elected(in his own right).

John Naylor

Posted by John Naylor | Report as abusive
 

What happens on the ground and what the government promises can often be two different things.We have friends that will not only use their house but their business in two and a half weeks.
The judge was not on their side, he didn’t want to know
about how they could be helped.
They have had many contracts and with a little help they could survive, but no they will lose their home of twenty years and be forced to survive on handouts, what an odd way to run a country.

Posted by Jan | Report as abusive
 

What a sorry mess we’re in. Jobs are the most important thing and the treat of job losses is the most worrying thing (personally I’ve just had my hours cut by half I work in legal conveyancing). So piffle to everyone else – that’s the reality of the situation. Do we keep lending to companies that run on an overdraft – some of these companies were probably never really viable but they employ people and no-one wants anyone to lose their job. Therein lies the rub. A large number of the public sector are sitting pretty, the bankers have stashed away their fat bonuses leaving the rest of us in the mire (myself included). Perhaps the whole country should accept less in order to keep everyone in a job – whilst we all de-leverage. Do I sound like I’m becoming a communist – perhaps that’s what this is all about communism by the back door!

Posted by Miss not Liz Jones | Report as abusive
 

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