Consequences of Subprime Crisis

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Consequences of Subprime Crisis

What will be the consequences of the recent Subprime Crisis for non-financial enterprises?


Effects on Businesses

Banks and financial institutions are unwilling to give loans to eachtother, which are needed to cover assets that have decreased in value because of the crisis. These banks will also be unwilling to provide capital to businesses or will at least demand high interest rates in return. As a result of the high charges for capital, fewer investments will be profitable for business, which will lead to less investments and to a potential slowdown in the economy. Certain (capital-intensive) companies may also end up in credit problems themselves.

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