A plan to increase the assets of small and medium-sized businesses is being prepared by the Dutch Ministry of Economic Affairs. A report in daily Financieele Dagblad explains that small businesses are often unable to acquire bank loans because of their weak assets position. This is likely to hamper their ability to recover once the economic crisis is over.
The ministry's proposal is for a guarantee fund system worth 1.5 billion euros to be set up. Risk investors would be invited to participate in a fund which will invest in small companies. As soon as 20 percent of the fund has been filled, the government will increase its leverage by making up the remaining 80 percent. This money will be derived from state-guaranteed loans.
Existing private equity funds do not have enough capacity to support small and medium-sized businesses, according to the Netherlands' Association of Holding Companies, which agrees with the aims of the scheme.
It is not certain whether the support plan for small businesses will be realised, since there are a few obstacles yet to be overcome. The Finance Ministry has not yet given its approval to the 1.5 million guarantee which would be at the expense of the national budget. The Economic Affairs Ministry's plan also needs to be passed by the European Union, which is highly critical of any kind of state support for business.
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