Credit crunch and raising capital

At this morning’s Michael Gove Parliamentary Breakfast Club one questioner asked about the difficulty of sizeable businesses from obtaining credit from banks – suggesting another credit crunch is looming.

From reading financial snippets I’ve concluded that there are signs of a major shift in where businesses can now raise capital and credit. With banks becoming ever more tightly regulated and with their need to up their capital ratio, sucking cash out of the system, meaning they’ve less to lend, businesses are looking elsewhere to raise funds.

They appear to be going directly to hedge funds, and a wide variety of non banking sources, even to their customers or suppliers. So while the focus is on the big banks, there are new ways to raise capital, which presents by opportunities and dangers.

This is the capitalist system working. We should acknowledge what’s happening and help businesses gain access to these new sources of credit and capital. I’ve as yet not worked out in my own mind how we should do this, maybe through a new form of exchange, perhaps like the coffee shops of old.

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