The bank talk in the crisis

Expert: Bankfachwirt (IHK) Moritz Jaeckle

Due to the pandemic, many companies are experiencing a loss of sales (whether due to the measures taken to contain the crisis or due to a general slowdown in demand), but in some cases orders cannot be fulfilled because global supply chains are disrupted. Clients and customers cannot pay on time – as a result, short-term liquidity is insufficient because the expenditure side exceeds the income side. Government aid that has already been applied for may not be granted in the requested and required amount or may simply be delayed.

Features of the crisis

The problems described in the introduction lead to the “third crisis stage”, the liquidity crisis. The drying up cash flow is no longer sufficient to service liabilities, the company increasingly loses its ability to meet all payment obligations comprehensively and on time. As a result, existing credit lines are permanently fully utilised or even overdrawn, direct debits are returned or payments are delayed and payment targets are missed.

Dialogue with the financing partners

In this situation, ideally at a very early stage, the banks and other financing partners are called upon to avert or eliminate the liquidity crisis. These discussions must be prepared in order to provide the banks with a solid basis for decision-making and to counter any doubts about the long-term creditworthiness and the viability of the business model. If possible, approach your financing partners as soon as you realise that the liquidity crisis is a realistic scenario, i.e. ideally before the bank or leasing company, for example, notices from warning signals that something is not right in your company. Early involvement of the banks and other financiers is also important and sensible against the background of the liability risks that may arise for them. A bank meeting in a crisis is undoubtedly an unpleasant thought, but the bank will appreciate having been involved at an early stage – and this proactive approach will, from experience, set you apart from many other borrowers! Guard rails for preparation:

  • Involve all financing partners on an equal footing. This creates transparency and facilitates the subsequent reorganisation and financial restructuring, for which everyone usually has to be involved anyway.
  • Collect all relevant data and prepare it in such a way that the bank gets a good picture of your company’s current situation with just a few glances and your explanation. Create maximum transparency in the process; if risk-relevant aspects subsequently come to light, trust will definitely be disturbed.
  • Create a robust plan of action (restructuring concept) that shows a way out of the crisis based on realistic assumptions. The plan of action must not be too “rosy”, but it must also convey that you believe in your company!
  • The concept should contain an idea, backed up with figures, of how the financing could be restructured in order to sustainably support the restructuring of the company.
  • Do not hesitate to call in specialists you trust (tax advisors, restructuring experts)!

Go into the conversation with a positive attitude, because as long as there is a conversation, there may be a way to restructure. The bank has a fundamental interest in restructuring because it increases the likelihood of repayment of the funds provided (if it is carried out soundly).

In the bank interview:

  • You should explain the cause of your company’s crisis transparently (but briefly), addressing the external and, if applicable, internal factors – but the focus should be on the future.
  • Explain your own recovery plan and support it with data and other information from your company. Explain what your assumptions are based on and, of course, what uncertainties are involved. The bank is aware that the plan is just a plan and that there may be deviations, especially in liquidity planning.
  • The bank will most likely make extended reporting requirements and possibly also covenants a condition; have these explained to you and check how they fit in with the restructuring plan.

Competent support in the crisis

F&P is at your side with a high level of expertise, even when the sea gets rough! We are happy to support you with restructuring concepts, the restructuring of financing or negotiations with your financing partners.

Bankfachwirt (IHK) Moritz Jaeckle

Senior Partner

+49 40 8000 845 92
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