The talk on everyone’s lips is of the global economic crisis and its effect on companies, consumers and politics. People are still keen to find a definitive solution to the financial crisis that would allow banks to hand on problem investments to a “bad bank”. This approach allows bank to separate themselves from problematical commitments. But for customers, it could become even more difficult to survive and recover from what are already difficult times. The Steinbeis Consulting Center for Concepts and Solutions for Medium-Sized Enterprises specializes in providing small and medium-sized companies with professional advice.
Several months ago, a medium-sized car dealership asked Steinbeis to help it prepare for a meeting with its bank. The dealer had been in the red for a number of years and had used up all its remaining capital. Its books showed “negative equity”. The upshot: ongoing liquidity problems, which were constantly being made up for with loans or yet more credit extensions on its current account.
During the meeting it emerged that the bank had already passed its commitment on to another bank within the corporation, a bank specialized in taking on and managing such problem loans. This bad bank is now responsible for all decision-making relating to any future dealings with the customer. The dealer’s bank had been forced to transfer its involvement as it was no longer in a position to solve existing financial problems with the customer.
To create clarity for all parties, the Steinbeis Consulting Center carried out a business analysis on the merits and feasibility of the company staying in business. The Steinbeis experts were also asked to implement a restructuring of the business after the analysis and provide the company with ongoing support.
After the Steinbeis experts had carried out a detailed continuation assessment and talking through various courses of action for the banks, all parties created a clear road map defining responsibilities for the planned restructuring. To complement the analysis, a refinancing proposal was drafted and tabled before both banks. The decision-making process was coordinated by the Steinbeis Consulting Center which managed the flow of information between all parties. To ensure that the company remained able to do business while it was waiting for the decision, Steinbeis temporarily managed its cash flow.
In the meantime, a financing deal has been struck in favor of the client. The Steinbeis experts will provide the customer with close support during restructuring and help it implement each course of action on site.
The German government has introduced a variety of measure to help companies, but as things currently stand the full negative impact of the financial crisis has yet to fun its full course. There are fears that a large number of small and medium-sized enterprises will run into liquidity and profit problems. When they do, help must be swift and free from red tape. Businesses will need a professional financial expert at their side to provide wellfounded advice and support.