3 questions to smart minds

When is Finetrading suitable as alternative financing

For this 3 questions to C. Wagner

WCF Fine­tra­ding
Photo: C. Wagner | WCF Finetrading
10. Decem­ber 2013

In times of restrai­ned lending by banks, compa­nies and inves­tors are looking for alter­na­tive finan­cing opti­ons — espe­ci­ally in the SME sector. These include not only private equity alter­na­ti­ves, mezza­nine finan­cing, bonds, etc., but also alter­na­ti­ves in procu­re­ment financing.

For this 3 ques­ti­ons to Direc­tor Consul­ting and Sales at WCF Fine­tra­ding, Munich

1. In which areas does fine­tra­ding play a role?

Fine­tra­ding is prima­rily a fast and flexi­ble type of purchase finan­cing that extends a company’s payment term up to 120 days. In addi­tion to the clas­sic pre-finan­cing of merchan­dise purcha­ses, fine­tra­ding can also be used to offset seaso­nal peaks, among other things. Many compa­nies also use fine­tra­ding to obtain better purcha­sing terms from suppli­ers — i.e. lower unit prices at better condi­ti­ons — and to streng­then over­all ties with key suppli­ers. Now, shortly before the end of the year, compa­nies are also using the bank supple­ment to comply with the covenants agreed with their prin­ci­pal bank as of Decem­ber 31 and thus enter the new nego­tia­tion talks for 2014 in a stron­ger position.

The reasons for using fine­tra­ding are ther­e­fore as varied and indi­vi­dual as the fine­tra­ding contract tail­o­red to the customer’s needs.

2. What role does d

In the wake of Basel III, bank-supported finan­cing will become incre­asingly diffi­cult for SMEs in 2014. Presu­ma­bly, the terms for loans will become shorter, and the rating, which is the central element in asses­sing a borrower’s credit­wort­hi­ness, will become incre­asingly important. In order not to be exclu­si­vely depen­dent on the house bank and to improve one’s own nego­tia­ting posi­tion with the house bank, it makes sense to addi­tio­nally use comple­men­tary solu­ti­ons of bank-inde­pen­dent insti­tu­tes. Fine­tra­ding, for exam­ple, is a supplier liabi­lity, i.e. compa­nies not only reli­eve their bank line but also improve their debt ratio and thus a key ratio for the rating. This is very important, espe­ci­ally for medium-sized compa­nies; after all, an impro­ved rating can also reduce the cost of loan finan­cing in the future. 

3. How do you assess trends and tenden­cies in alter­na­tive finan­cing in general?

In a nuts­hell: the trend is posi­tive in any case. Earlier this month, Roland Berger, toge­ther with Credit­re­form, presen­ted the Working Capi­tal Manage­ment 2013 study. Among other things, this shows that 89 percent of SMEs consider inter­nal finan­cing to be the most important measure for impro­ving capi­ta­liza­tion. The liqui­dity poten­tial of inter­nal finan­cing is esti­ma­ted at around EUR 87 billion, so I am sure that offers for finan­cing alter­na­ti­ves such as facto­ring, leasing or even fine­tra­ding tail­o­red to the target group of SMEs will become incre­asingly important. 

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