Why funding without a program of measures is usually not enough

The real error

But this is precisely where the real error begins in many cases. Because a higher credit line is not yet a turnaround. More liquidity is not yet a turnaround. And additional money is certainly no substitute for the hard, often uncomfortable work that real restructuring entails.

I see time and again that in crisis situations, a lot of energy is invested in the question of who is still giving money, but far too little in the question of why the company got into this situation in the first place and what specifically needs to change now. Yet this is precisely the core of any serious restructuring. Those who only extend the financing without simultaneously eliminating the causes often only postpone the problem. You gain time, yes. But if this time is not used consistently, it will end up being very expensive.

Or to put it even more clearly: a crisis cannot be financed away.

That sounds harsh, but in practice it is often the decisive truth. Additional financing can be necessary, sometimes even absolutely essential. Without liquidity, no measures can be implemented, no supply chains stabilized, no production secured and no calm brought to the business. But liquidity is only the prerequisite for restructuring, not the restructuring itself. It is the window of opportunity, not the liberating blow.

Liquidity is just the beginning

This is precisely why it is not enough to just look at the bank in a crisis. The more important question is not: How much more money do we need? The more important question is: What needs to change in this company now so that this money is not missing again in just a few months?

And this is where it gets awkward. Because the answer almost never lies in a single external shock. Of course there are difficult markets, economic downturns, geopolitical pressures, energy prices, customs duties, weak demand or pressure from individual sectors. All of this is real. But in most cases, the crisis hits a company that already had internal weaknesses: costs that are too high, too little transparency, slow decision-making, weak working capital management, operational inefficiencies, an overstretched organization, unclear responsibilities or a business model that is no longer as viable as it was made out to be.

More money does not cure these problems. It only covers them up for a certain period of time.

And this is where the risk begins. If fresh capital flows into the company during this phase without a robust program of measures being drawn up and implemented at the same time, there is an increased risk that good money will be thrown after bad money. This sentence is uncomfortable, but in restructuring it is not just an empty phrase, but a daily reality. Not because banks are hard-hearted or shareholders have no patience, but because money alone does not improve margins, speed up processes, streamline oversized structures or remedy management deficits.

Banks finance perspective

Banks now know this very well. They no longer simply finance a short-term bottleneck. They want to understand how a company is to get back on a sustainable course. They want to know where the crisis is coming from, what specific measures have been decided, what effects will result, how resilient the planning is and who will be responsible for its implementation. Hope is not a concept. Neither is optimism. Banks do not finance sentiment, they finance perspective.

And this perspective is not created by PowerPoint, but by a serious program of measures. This is precisely where the difference lies between a company that merely continues to be financed and a company that is actually being restructured. A good program of measures is not just any document for the bank. It is the backbone of the restructuring. It shows whether those responsible are prepared to accept reality and work with it. It shows whether decisions have been clearly made, responsibilities clearly assigned and effects clearly quantified. This is where the desire for improvement is separated from the ability to change.

And this is precisely where many companies in crisis fail, not necessarily because the problems are unknown. The weaknesses are often well known. You know that the costs are too high. One suspects that sales are not effective enough. You can see that the working capital is tying up too much liquidity. You sense that the organization is not reacting fast enough. But knowledge alone is not enough. What counts in a crisis is not whether you can name the problems, but whether you can translate them into a stringent implementation process. This is precisely the point at which many companies are overwhelmed.

Refurbishment is a discipline in its own right

Restructuring is not just normal management under difficult conditions. Restructuring is a discipline in its own right. It requires a different pace, a different discipline and often a different rigor. Decisions must be made more quickly, progress must be clearly measured and measures must be consistently followed up. Feelings do not help. Wishful thinking certainly does not. In a real crisis, leadership is no longer a task of moderation, but above all a question of clarity, consistency and credibility.

I therefore consider it one of the biggest mistakes in crisis situations when companies only bring in external restructuring expertise at a very late stage. Far too often, attempts are made to resolve the situation internally first, even though the company lacks the experience that would be crucial in this phase. This is humanly understandable. Nobody likes to seek external help as long as they still hope to manage it on their own. But in many cases, this hope comes at a high price. Because the longer a company waits, the less room for maneuver it has. And the smaller the room for maneuver, the harder, more expensive and riskier the subsequent measures become.

The lever of external restructuring expertise

This is precisely where the added value of an experienced CRO or restructuring consultant lies. Not as a decorative figure for bank presentations, but as an operational driver. A good CRO initially brings something seemingly banal, but priceless in crises: order. He creates transparency about liquidity, results, the status of measures and risks. He separates hypotheses from facts. It brings structure to discussions that were previously characterized by uncertainty, wishful thinking or mutual recriminations. Above all, however, it ensures that a restructuring idea becomes a restructuring process.

This is the point at which external expertise unfolds its greatest leverage. It does not replace management, but complements it where specific crisis experience is lacking. It helps to set priorities, to professionalize negotiations with banks and shareholders, to properly develop an integrated restructuring concept and, above all, to safeguard the implementation against internal friction. Anyone who has ever experienced how a company in crisis works on symptoms for weeks without resolutely addressing the actual cause knows how valuable this external focus is.

Prioritization and implementation

Then it’s about prioritization and implementation. Not everything is equally important. Not every construction site has to be torn open at the same time. But the few things that really count now must be tackled with full consistency. This is often the difference between hectic actionism and genuine restructuring. A company does not need activism in a crisis. It needs focus. And then comes the most unpleasant part: implementation. Not announcing, not postponing, not softening. Cut costs, adjust structures, clarify responsibilities, stabilize processes, question business models, reduce inventories, conduct negotiations, stop projects, set new priorities. Restructuring is never elegant. But it must be effective.

Anyone who believes that you can simply borrow a little more money in such a situation and otherwise carry on internally as before completely misjudges the mechanics of corporate crises. Financing then becomes a sedative pill, but not a therapy. It works better for a moment, but the actual illness continues to work. In the background, losses mount, trust erodes, stakeholders become more nervous, and suddenly you are at a point where you are no longer shaping, but only reacting.

Current cases as a warning signal

This can also be seen in current cases if they are interpreted with the necessary caution. These examples do not prove that only a single factor was decisive in each case. But they do show very clearly that financing alone is no substitute for restructuring and that a lack of turnaround expertise, or expertise brought in too late, harbors considerable risks.

BayWa is a particularly obvious example. It shows how closely financing, portfolio decisions and operational restructuring are interlinked. The debt-financed expansion, the subsequent discussions with financiers, asset sales and the appointment of a CRO make it clear: even if financing is secured, a professional restructuring architecture is required in parallel. Otherwise, the financing will not be a turnaround, but merely a stopover.

Another instructive example is Northvolt. The case is so instructive because there was a lot of capital available and financing was not the only problem. Production start-up, scaling, operational excellence and realistic management proved to be at least as critical as the capital base. This is the real message: even very large amounts of financing are no substitute for operational excellence, realistic scaling and restructuring expertise anchored at an early stage.

KTM can also be usefully mentioned in this context without undue exaggeration. The scale of the funds required and the restructuring agreements show that a crisis eventually reaches a point where financing, governance, negotiations and operational recovery planning are inextricably linked. At such a stage, a lack of restructuring experience in the company is no longer a minor matter, but a massive risk factor. Because from then on, it is no longer a question of normal management, but of a closely timed restructuring regime.

However, I would not use these examples as a moral assignment of guilt. It’s not about looking smarter in retrospect than the people involved. The point is to make a pattern visible. Crises rarely escalate because nobody wanted to raise money. They often escalate because fundraising, root cause management and professional implementation were not properly coordinated in terms of time or content. This is precisely where the dangerous illusion arises that a financing solution is already a restructuring solution.

The psychological factor

There is also a psychological factor that is underestimated in many specialist articles. For entrepreneurs and managing directors, asking for additional financing is often easier emotionally than radically confronting their own structures. A meeting with a bank can be experienced as a conversation of hope. A program of measures, on the other hand, forces you to face hard truths. It forces you to decide which areas are no longer viable, which products deliver too little margin, which managers do not meet requirements, which investments have been wrongly prioritized and which habits need to be ended. Financing nourishes hope. Restructuring requires consistency. This is precisely why, in practice, the one is so often sought first and the other too late.

The lesson from this is clear to me: in a crisis, it is not just a question of whether someone is still financing. Above all, the decisive factor is whether there is someone in the company who can turn this financing into a resilient restructuring path. And if this expertise is not available internally, then it has to come from outside. Early on. More consistently. And without false pride.

Because the truth is: companies rarely fail because no-one has even mentioned the word restructuring. They often fail because they spent too long focusing on liquidity and too little on implementation. That financing was confused with a solution. That time was bought but not used.

Understandably, entrepreneurs in particular find this difficult. Financing initially seems like a vote of confidence. A program of measures, on the other hand, is often an unsparing mirror. It shows what is not working, who is overstretched, which structures are no longer sustainable and where you have been fooling yourself for years. Financing gives hope. Restructuring requires honesty. Perhaps this is precisely the reason why the first step so often goes in the direction of capital and only much later in the direction of restructuring.

But in the end, it is not hope that saves the company. What saves it is the ability to accept reality and deal with it consistently. That is why I am convinced that anyone who only talks about money in a crisis is talking about the symptom. Those who talk about measures, responsibility, timing and implementation are talking about the solution. This is where real restructuring begins.

And this is precisely why the involvement of an experienced CRO or restructuring consultant should never be seen as the last step when it is already almost too late. It should take place much earlier, namely when the company still has options, when it can still be shaped and when the time gained can still be turned into real stabilization. It is at this stage that external expertise has its greatest impact. Later on, it often only becomes a tool under maximum pressure.

Conclusion

My conclusion is therefore clear: additional financing can be right and necessary in crisis situations. But it only makes sense if it is part of a serious restructuring process. Without a robust program of measures, without clear responsibilities and without genuine restructuring expertise, additional liquidity all too quickly becomes nothing more than an expensive extension of the crisis. Or in a nutshell: a bank can finance time. The company itself must restructure.