The impact of the credit crunch on German SMEs

12.01.2010

 

Despite the efforts of the European Central Bank and German financial institutions to provide sufficient funding...

 

 

Despite the efforts of the European Central Bank (ECB) and German financial institutions to provide sufficient funding, credit conditions have drastically tightened in recent months.It is particularly striking that even the KFW is reserved in credit granting. This situation is leading to worry and the danger that enterprises will not possess sufficient financial resources for the expected economic upturn. There is in fact a risk of stifling an economic recovery and in turn creating  insolvency risk for companies.

 

How can businesses protect themselves against a financial squeeze and credit crunch? There are various possible solutions. First and foremost, there is the providing of bank credit with short-, medium-and long-term financing. The second possibility lies in improving accounts receivable management by such means as factoring, forfeiting, repurchase agreements and securitizations (ABS transactions), which can lead to positive results. Other possibilities include cash management systems.

 

It is very important for small and mid-size companies to speak with bank partners early on in an honest and open way and ask for sufficient credit. Openness is crucial in creating a basis of trust in difficult times. If the banks are informed of problems early on, they will be more willing to help and it is easier to take measures in time to help.  Should a crisis occur, problems should first of all be identified and then the appropriate measures should be taken- always under the guidance of a specialized consulting firm.

 

A transparent and continuous flow of information between companies and banks helps  build and consolidate trust and recover from a crisis situation.

 

ADMINEX Germany

*Source: Dieter Dorn, Financial Partner of ADMINEX in Germany.