Companies forced to lay off staff during credit famine
The Government’s €10 billion re-capitalisation plan to rescue the banks should include a dedicated credit fund for small and medium businesses, Fine Gael Enterprise Spokesman Leo Varadkar TD said today (Tuesday).
“Over the past few months, profitable and viable small and medium businesses have found it increasingly difficult to get access to credit. In some cases, overdrafts have actually been reduced. Credit is the oil in the machinery of commerce and, without it, businesses cannot get money to expand and make new orders. Businesses also need credit to maintain cash flow and meet payroll costs from time to time.
“Small and medium business have been contacting me repeatedly to complain that the credit famine is forcing them to lay-off staff. The situation has not improved since the bank guarantee scheme of eight weeks ago, or the release of funds from the European Investment Bank (EIB).
“I am very concerned that Irish banks will use Government money to cover losses incurred from bad loans made to property developers and mortgage-holders instead of freeing up credit. Several banks in the UK, Europe and the United States have been nationalised and recapitalised but there is little evidence that credit flows to small and medium enterprises have been restored.
“The provision of a dedicated fund to lend money to small and medium enterprises must be a condition of the recapitalisation plan. Any capital supplied by Government must be used as an addition to the SME lending schemes already announced by some banks. We need to restore credit flows to viable small and medium enterprises to prevent closures and sustain jobs. The value of this sector should not be underestimated as 777,000 people rely on small and medium sized businesses for their jobs.”