What to do with financial bottlenecks on the debit-side?

If a company encounters problems in financing its receivables in the current Corona-stressed situation, there are various ways to expand its financing options.

On the one hand, an attempt could be made to use a KfW loan to obtain additional financing flexibility for its own customer lending as well. This would make it possible to finance customers' longer payment terms.

A second option is factoring. This involves selling part or all of the receivables to a factoring company. The payment from the factoring company is received immediately, even if the customer payments are made at a later date.

Depending on the structure of the contract, the factor can also assume the credit risk. It should be noted that fees are due in the form of discounts on the invoice amounts. This is associated with longer-term commitments, as a company will only be able to dispense with factoring again once it has built up a sufficiently large liquidity buffer, e.g. to survive the duration of the average outstanding period without access to liquidity.

A second alternative could be purchasing factoring for supplier invoices with short payment terms. Through reverse factoring or finetrading, the factoring company takes over the timely payment of the supplier, the own payment to the factoring company is made at a later date - possibly with a surcharge. This can also create additional liquidity leeway. In both cases it must be taken into account that the surcharges and discounts must not completely consume the own profit margin.

Credit-insured limits
to the principal bank to secure a further loan can also be used if this scope has not already been exhausted.

Finally, an extension of the payment terms with your own suppliers (supplier credit) also provides leeway and helps to reduce the discrepancy between the payment terms of your customers and the payment terms to your suppliers.

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