With the global credit crunch now firmly entrenched in the worlds financial market, many money lenders are now tightening their purse strings and refusing to help out small companies that are heavily reliant upon credit to function. Some people may ask, why do small companies need access to cash? Well the simple answer is that they need the money for a number of key financial issues, including:

• Paying staffs wages
• Paying suppliers
• Utility bills for the running of the company

This is just a very small snapshopt of what small companies need the cash for and failure to meet any one of these, and indeed any other financial requirement can culminate in the collapse of the small business. With this comes a knock on effect to both the staff who are subsequently out of employment, and also the suppliers, who ultimately end up out of pocket.

So what is the solution to this? Well, if I had the answer I would be in a high position within the Goverment and not blogging on finance blogs! But I would suggest that to aid small business’ the Government needs to instruct the banks and building societys to release funds to the businesses to enable them to function and pay their debts. As discussed, this would have a knock of effect to many people within the business ‘chain’ and, ultimately have a positive affect all round.

Ads the UK Governemnt actually part owns many of the banks now, they shoud, in my humble opinion, enforce the release of capital. For too long banks, and their higher end employees have got away with making poor decisions. They have also made huge bonuses and this has impinged upon the UK economy and led to massive unemployment. Recently, Sir Fred ‘the Shred’ had his house pelted with stones and this kind of action should certainly be avoided. His case has become a cause celbre and the subsequent witch hunt will have little impact. He has received his pension and it will not be repaid. 

We need to give thought to how to prevent a further deepening of the credit crunch and try and help small business’ get through this difficult time, through directing banks to release funds to small business to help them survive!