News and features

Mon, 8 Dec 2008

Lehman Brothers collapse 'could challenge entrepreneurs'

UK start-ups could face tighter lending rules after investment bank goes under.

Entrepreneurs looking to expand their business are likely to face growing challenges in raising capital after international investment bank Lehman Brothers went bust, analysts have said.

The shockwaves from the bankruptcy - which along with the demise of Bear Sterns and the takeover of Merrill Lynch cuts Wall Street's Big Five down to two - have shaken markets across the globe and in response many lenders, including some in the UK, are expected to tighten their belts.

Matthew Molberger, an analyst at Renaissance Capital, told the Los Angeles Times: "It has become much more difficult for small and medium-sized companies to raise money ... And the events of this past weekend haven't helped."

Many entrepreneurs were already facing challenging borrowing conditions as the global credit crunch has increased the cost of lending and constricted the flow of capital often used to support new firms.

However, some experts told the publication that the current turbulence in the banking sector could ultimately prove beneficial for well-run businesses, as it will eradicate "rampant speculation" and bring about more disciplined lending.

>> Explore learndirect’s business courses covering the latest business thinking and management skills for qualifications from the Institute of Leadership and Management.