Danish Parliament Approves Bill To Help Small Businesses

Danish Parliament Approves Bill To Help Small Businesses

Danish Parliament Approves Bill To Help Small Businesses

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Berlingske has:

The Danish Parliament has decided in favor of a business credit extension of 12 bio. DKK (approx 2 bio. USD) for small- and medium companies over the next 3 years.

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The new finance options are to be in place before the end of 2012.

The aim is to establish several new financing options in Vækstfonden og Eksport Kredit Fonden



The proposal was carried with a very large majority in parliament.


The aim is clearly to assist small- and medium businesses in finance. The major corporations can much easier issue bonds and sell them directly to the investors. Small and medium businesses are in a much tougher position when dealing with the banks.

Over the last year or so, the CB has extended credit to banks using “good loans” as collateral. It is worth noting, that the term of three years is much the same as the term for the long term CB credits to banks.

Having loans as collateral is one way of securing peace that the loans are not called for payment. Extending state power guarantees the removal of any excuse the bank has to terminate.

It is hardly a secret that the major banks in Denmark are squeezed for cash, as they have to buy their real estate mortgage bonds themselves at an incredibly low interest rate. This has – in round one – lead to a credit squeeze on especially small- and medium businesses. Now – in round two – these loans are lifted out of the banks.

The move should also be interesting to importers, as their supplier might – at a price – be able to extend credit, which otherwise might be difficult to obtain.

The amount does not seem impressive, but one should consider that a real estate mortgage takes about 30 years to reach full maturity. That is the capital is turned over once in about 20 years. Business credit is much faster with a turnover of – say – four times a year. That is the turn round speed is 50-100 times higher. These credits are also much more vulnerable to the whims of the bank, as they have to be renewed four times a year in practice. That is the reason for a credit squeeze:  A bank gets into trouble when debtors don’t pay – which means that debtors that DO pay cannot get credit.

As soon as your customer pays you the bank clamps down and cuts the  credit line – normally without informing the debtor.

For round three we lack an issue of bonds with collateral in concrete investments in the business. This would give investors access to medium term investments to harmonize their portfolio with their obligations.

What we are seeing now is the lifting out banking business from the banks – leaving the banks only with inferior quality loans.

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