Monday 5 December 2016

David McWilliams: Loan guarantees can help firms escape 'liquidity trap'

Published 15/02/2012 | 05:00

The Government's move to extend loan guarantees to small firms is a good move and has the potential to unlock a credit bottle-neck, which could help many small firms that are stranded in no-man's land, living off cash flow and missing opportunities.

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Anyone who runs a small business knows that you need capital to grow. It is possible to grow out of cash flow and many thousands of companies have, but when there is a credit crunch going on here and not in some of our competitor countries, Irish firms are at a huge disadvantage.

Business people also know that when there is no investment in a firm, the firm can die on its feet. If a lack of credit means a firm fails to invest, it might look ok on the outside but it is gradually hollowing out its productive marrow and very soon it will be bypassed by better-capitalised competitors.

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