Financial affectsPage 4
Bank collapse/property exposurePage 4
Debt overhangsPage 4
Credit rejectionsPage 5
High Interest RatesPage 6
Delayed payment periodsPage 7
Employment GrowthPage 8
Black economyPage 8
Government & RegulationPage 9
Credit SchemePage 9
SME Credit Guarantee SchemePage 9
Code of ConductPage 9
Tax PolicyPage 10
Employment RegulationPage 11
Red Tape employment LawPage 11
Government Action PlanPage 11
Networking, Technology Development and InfrastructurePage 13
Bankruptcy and LendingPage 14
The concept of Quantitative Easing is to boost the economic growth. ...view middle of the document...
(Central Statistics Office, 2014)
(Central Statistics Office, 2014)
The above statistics shows that SME’s in Ireland are one of the most important elements of our economy. With around 70% of all people in Ireland being employed by some type of SME it is important for the country to support SME’s wherever possible as this sector has a significant impact on the future growth of the Irish economy. According to the Central Statistics Office if SME’s are struggling this may have a knock on effect on a significant number of the Irish population. It is therefore extremely important for the government to support SME’s during the recent financial crisis and the recovery process. (Central Statistics Office, 2014)
This report therefore will highlight some of the major problems SME’s are facing after the financial crisis that hit Ireland and the rest of the world in 2008. Some of the key problems that SME’s are facing are the difficulties they have in terms of loans and funding, which include high lending costs and low loan approval rates. Government Schemes and support structures including regulations have already been put in place to some degree; however it is suggested that they only cover a certain proportion of the problem.
Furthermore it considers existing and proposed solutions for networking, technology and infrastructure support.
Bank Collapse including property exposure
One of the major issues in the banking collapse was that a lot of SME’s heavily invested in the property market or used properties as capital for their loans. Due to the housing market crash in 2008 a lot of businesses were faced with high debt and loss of capital.
The central bank indicates that there are three key areas of property exposures that can be directly linked to SME’s in Ireland.
Exposure in the SME’s private household, which included all private mortgages and loans of an SME owner
SME commercial real estate asset – this is where SME’s invested in properties
SME’s owner personal property debt – this includes personal housing mortgage
(Fergal McCanna & McIndoe-Calder, 2014)
SME’s with property exposure are mostly companies in the construction and hotel sector. New reports however reveal that construction sectors are now one of the lowest debt holdings companies in Ireland as they are already made insolvent. Companies in the hotel sector have almost double the default rate than that for those without property exposure.
SME’s therefore with any type of property exposure received during the financial crisis have seen a reduction in their real estate values of circa 50%, which means high losses in their property investments and therefore a reduction in the values of their assets. This is also one of the major causes of the large debt overhangs of many SME’s in Ireland. (Fergal McCanna & McIndoe-Calder, 2014)
The below table by the central bank provides a table with an overview of the overall debt...