Asset-based finance — a crisis-proof alternative to loans
Many companies, especially manufacturing companies or traders, have an extensive inventory of machines, vehicles and raw materials or well-stocked warehouses. In traditional financing, these assets often do not play a decisive role, although in some cases they tie up enormous values in the company. However, with approaches such as sale and lease back, precisely such assets — for example, used machinery — can be used to generate liquidity as part of pure internal financing. For this purpose, a company sells the corresponding assets and leases them back immediately afterwards. Thus, it receives new funds and can still continue to use the machines without interruption.
Another example: If an online retailer has rich current assets, for example, it can use the asset-based credit model. These object-based loans allow the company’s own inventory, raw materials, merchandise, tangible assets or land charges to be used as collateral.
These asset-based models often open up more financing options than traditional loans — for example, in cushioning bottlenecks, in advance order financing, in bridge loans, in successions or acquisitions, in growth, in the renewal of business models and processes, and even in restructuring or turnarounds. This is because the creditworthiness of a company plays at most a secondary role for object-based financing. Sale & Lease Back as well as Asset Based Credit provide quick and flexible liquidity, which extends the entrepreneurial scope even in the special situations mentioned above. Companies can thus further differentiate their financing structure and reduce their dependence on a single financial service provider. With a strategic mix, they adapt to different scenarios and can also react quickly on the financial side in future crises. Thanks to the streamlined and effective settlement process, a company does not have to wait long for the funds it needs with object-based financing. If corresponding valuable assets are available, the respective amount can usually be made available within a few weeks. In the case of Sale & Lease Back and Asset Based Credit, the process of inspecting machinery and goods is highly professionalized and geared in such a way that it has no impact on the operating business.
The next period will continue to be characterized by Corona, uncertainties, restrictions and cuts. Overall, we expect difficult months for SMEs. So far, the feared wave of insolvencies has failed to materialize — mainly due to the extensive aid measures and state interventions. However, experts are convinced that the crisis will also be reflected in massively increasing restructurings in the foreseeable future. Already, the number of companies being kept “artificially” alive by means of aid loans, payment deferrals and short-time work is growing at an alarming rate. But even companies that are still solidly positioned will have to work on their structure, processes and business model. After all, Corona has changed the markets permanently and once again accelerated the shift to digital.
The house bank will not always be able to provide solutions here in the future. The pandemic will not leave the traditional financing market unscathed: Banks are expecting defaults by their corporate customers and a corresponding increase in the need for write-downs. This will certainly have a lasting impact on procurement policy. Many financiers will act very hesitantly when it comes to new loans and will largely withdraw from sectors that are particularly affected and sensitive to the economy: Event organizers, the hospitality industry, retail, the automotive industry and its suppliers, mechanical engineering and others. Accordingly, there is a growing demand among entrepreneurs for alternative financing options via credit platforms, factoring, debt funds or asset-based models.
About Maturus Finance
Maturus Finance GmbH is a bank-independent financing company and offers innovative ways of corporate financing. The financial services provider is the point of contact for medium-sized manufacturing companies and dealers who are looking for alternatives to existing banking relationships as part of their current financing structure. Financing solutions are offered from a volume of EUR 250 thousand and up to EUR 15 million, in individual cases even beyond. This generally corresponds to company sales of around five million to 200 million euros. Maturus Finance GmbH is headquartered in Hamburg, Germany, and since 2015 has also been v