Credit Crunch: alternatives sought

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Companies are complaining about the reluctance of banks

Companies are complaining about the reluctance of banks

More and more companies in Germany are complaining about the reluctance of banks to lend. In order to finance their expansion, successful middle-marketers are increasingly using other forms of financing.

One way to provide money “off balance sheet” is to create project companies that are equity backed by venture capitalists. These companies are legally constituted as a limited partnership and independent of the actual company. They finance a variety of purposes: research and development as well as the purchase of raw materials.

By outsourcing the activities to a project company, the balance sheet will not be burdened and the equity ratio will remain constant. This is particularly important for many companies that use a project company: A good equity base is a success factor, especially in times of crisis, because the credit rating improves.

Project companies can in principle finance any activity.

Project companies can in principle finance any activity.

It is possible to completely house research and development work in an outsourced society. If patent maturity is achieved or sustainable sales are achieved, the company can adopt the patent in its own balance sheet. Investments that are part of the current assets are now also financed through project companies.

The sharp increase in commodity prices has forced many companies to reduce the stock of commodities on the balance sheet, which is otherwise funded by bank loans, so as not to be inferior. The investee companies, which provide project companies with equity, are already seeing themselves as the winners of the crisis, even though many activities have fallen as a result of the economic downturn. The growing presence of financing alternatives in the minds of German companies will continue to make this segment more important, even after the financial crisis.

In any case, bank lending to companies in the euro area fell by $ 35bn in May compared to May and now stands at $ 4 478bn, as the European Le Sentro Bank announced on Monday. In addition to the drop in demand from the crisis and the tightening of bank lending policies, alternative forms of financing were also possibly responsible.

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