Entrepreneurs to the rescue

The credit crunch is no longer a problem solely to the financial sector. Other industries to are facing the consequences. Some have reduced production, others even shut down complete production plants (cfr car production facilities). We have even had the first bankruptcies. Unemployment is on the rise and at the same time it’s getting increasingly difficult for organizations to get loans at affordable rates. It’s not looking good.

Geert Noels, a Belgian authority on economy at Petercam, is convinced that we owe it to ourselves. We are no longer acting rationally. Companies are freezing their budgets and postponing investments because of the fear for the crisis, resulting in a self-fulfilling prophecy. In his book Econoshock (which will be available in the bookstores this week), Mr Noels suggests local authorities should support companies in order to get the required funds to overcome the credit crunch. I agree, but I would take it even further.

I plead for the construction of an emergency fund, financed by wealthy entrepreneurs. This fund can provide loans (and guarantees for loans) to smaller companies and promising start-ups in trouble due to the credit crunch. These entrepreneurs would then be compensated by interests and dividends and not through equity transactions. The purpose is to provide short-term funding, not selling off companies for peanuts.

Don’t get me wrong: government interventions could be very valuable, but I fear it will take them take too much time to mobilize. And even if mobilized, I can imagine larger companies will get priority and not the promising start-ups or small enterprises, despite their importance when it comes to employment in Belgium. Our entire economy and social model is built on the welfare of these small companies. And yet they are particularly vulnerable to finding the necessary funding and financing. So I would suggest that entrepreneurs who’ve done well over the past few years, come to the rescue of their colleagues who have only started at the wrong time.

The construction of such a fund should create a window of opportunity for these promising companies and thus foster their growth. If we manage to keep them growing and thus guarantee our employment rate, we are one step closer to recovery. Would't you agree?