Corona is killing small companies and Start-ups and nobody seems to care…
Countries and big companies have easy access to bank funding, even in times like today “when the markets are disturbed and liquidity dries up”. The last phrase is a euphemism for the situation when banks stop lending and stop buying debt instruments like bonds and commercial paper. In good times banks always claim to be “market makers” in the bond and commercial paper markets. The herd instinct works quite effectively in both directions – when there is a threat they just stop making markets and complain that liquidity has dried up!
Banks have no incentive to lend money to companies that they think are facing insolvency because they are running out of money, and banks also know that when they stop maintaining markets governments using taxpayer money and at the risk of taxpayers step into the markets.
The fact that the Finnish Central Bank has promised to supply he banks with €500 million is little help to the real economy but very nice for banks. It represents less than 0,1% of the banks’ balance sheet here – smaller than peanuts…
In good times all the banks where talking about Fintechs and Start-Up Hubs… noiw those good times are over and business is back to normal.
Even if Finnvera gives a guarantee on behalf of a loan to a start-up or other small company, the regulations on “Know your Customer” (KYC) apply and that means that a loan will be hard to secure even with a guarantee.
Banks do not really want to have SME’s as customers because they are a small costly nuisances when all the regulations have to be carefully applied. There is just not enough profit to cover the costs.
We should be talking about over-regulation and how it is killing growth and innovation.
Small companies and start-ups will run out of money if their invoices are not being paid and if customers are too frightened to go out and buy their products. Since this group does not have access to banks then what are they meant to do?
You may remember that that ministers and bankers all wanted to be seen at Slush in Helsinki in November. Where are they now?
What is the point of having Slush if the whole party is allowed to collapse a few months later?