Finanacing the Mittelstand in Germany

To understand what expectations the Mittelstand, or family-owned, small to mediumsized enterprises (SME’s) have from their banks it is necessary to understand how the Mittelstand operates. The Mittelstand is the driving force in German economy placing special emphasis on long-standing and reliable partners. Mittelstand companies have, thus, equally high expectations from their funding partners. They are looking for professional advice and mutual understanding.

For many SME’s, financing is a matter of trust and transparency. But transparency and comparability can only be achieved by evaluating several offers from different financing
institutions. Many companies tend, however, to choose the easy way and to go directly to their trusted banks they have been working with in the past. And yet strong companies could benefit a lot from working with more than only one bank and from diversifying their portfolio. By gaining new expertise companies would have a more transparent, comparable and broader perspective enabling them to become more independent.

Today companies are already using various forms of financing. They prefer mainly traditional products such as working capital loans, leasing, factoring, forfaiting, trade finance, avals and loans. But alternative products such as mezzanine financing, pri-vate equity, Schuldscheine or stock market products are increasingly popular.

To handle the variety of financing products and the related risks it is necessary to have special know-how in risk management. Although it is highly risky interest, currency and commodity hedging with derivatives is a common practice in risk management of SME’s.

So, an active asset liability management is crucial not only for the rating process of banks. When SME’s choose the right financing methods at the right time, they are becoming more independent and more flexible regarding their business decisions.

The selection of different financing methods requires a clear structure customized to the needs of the business. Bankers, however, are often not able to meet these requirements and provide customized products to their clients as in most cases they have a specific portfolio they are working with and which they are offering to their clients. The development of the past years shows the number of experts who are primarily focused on selling their own products and maximizing their profits has increased. Today it is very rare that a banker analyzes and evaluates the financing structure or the planned long-term development of a company.

The experts from our BrainFleet network will help you handle these complex financing issues. With their long-standing experience in management and in the financing of SME’s our experts will help you optimize your banking portfolio and show you which financing options are best for your business.

The biggest challenges of the relationship between SME’s and their banks

In the last years banks have seen increasing requirements for financing methods in the Mittelstand. The implementation of new reforms (e.g. Basel III), increasing requirements for the risk management and the low interest rate environment has increased the pressure throughout the banking sector. Besides, the number of alternative financing institutions that offer products other than traditional bank products is rising. This dynamic environment poses, thus, a big challenge to companies of the Mittelstand to find the right funding partner. Many businesses are increasingly considering alternative ways of financing.

With their comprehensive industry expertise and a long-standing network of experts our BrainFleet members will help you find the right financing partner for your business.

Businesses can resort to various funding programmes

Today the Mittelstand in Germany can resort to various financing methods.
Depending on their plans, businesses can choose one of more than 1,700 financing op-tions. The funds are provided by the German Federation and the 16 constituent states – the Länder, the European Union and guaranty banks. Finding the right partner is, however, not an easy task and many businesses are not even aware that their plans can be financed. If businesses are not advised by their banks or offered any funding programmes businesses will bear the opportunity costs.

Our BrainFleet members will help you find the best funding options for your business and make your business thrive.

SME’s have high expectations regarding their funding – We help you find the best financing options for your business!

If you are looking for a professional funding advice or if you are interested in another service of our BrainFleet network do not hesitate to contact us! Our experts are the perfect partners to help you find the best solutions for your business.

Author:
Karl-Heinz Stiegemann a BrainFleet member has joined the Commerzbank AG in 1980 and was responsible for the lending business with focus on corporate business in Düsseldorf until 2002. In 2002 he started at the Stadtsparkasse in Düsseldorf and was responsible for the lending business with focus on corporate business. In 2003 he was granted the full banking licence from the German Federeal Financial Supervisory Authority and became the board of the Stadtsparkasse Düsseldorf, responsible for the corporate banking, real estate financing and private equity. In 2009 he founded the IFM (Institute for Small and Medium Sized Enterprises) which he is lead-ing ever since.