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In the vast majority of cases, bank financing for medium-sized companies is tied to the personal liability of the owners or managing directors. This is a standard collateral requirement from commercial banks and savings banks, often justified by the phrase: "If you don't believe in your company, how can we as a bank?" For the guarantor, the scope of liability extends from the company's legal structure into their private assets. If this situation is not actively managed, it can have far-reaching consequences for both the guarantor and the company. Beyond the risk of liability for company debts, it can also lead to restrictions in succession planning. The focus should be on a clear financing strategy that encompasses the structure of the company's liabilities as well as the terms of debt capital – including interest, collateral, and covenants.
Enabling financing without banks
A fundamentally "simple" path is bank independence, where the company finances itself without bank loans. A strong earnings position, stable equity at the required level, and, if necessary, a dividend or withdrawal policy aligned with your objectives are key cornerstones that must be integrated into the associated financing strategy. Focusing on these points allows companies to become independent of bank financing step by step. This process does not necessarily restrict the company's operational flexibility. Utilizing alternative forms of financing enables consistent investment activity and the funding of working capital.
Actively managing equity positions can be an important tool for achieving liability-free private assets. Shareholders can withdraw excess liquidity and invest it outside the company. When financing is needed, these funds can be made available to the company again. An attractive alternative is the lump-sum-funded pension fund (pauschaldotierte Unterstützungskasse), often called the "bank within the company." The company chooses this as a vehicle for occupational pension schemes, thereby keeping significant amounts within the company's financial cycle. This benefits employees while providing liquidity that covers financing needs outside of traditional bank loans.
Becoming independent
Successively strengthening the asset side of the balance sheet with valid assets opens up another way to keep private wealth free from liability for company debts. These assets strengthen the negotiating position with potential lenders, as they can be used as collateral for bank loans. Stable economic conditions with corresponding company assets, in a ratio acceptable to banks for the desired financing, provide a solid foundation for obtaining credit without the need for personal guarantees.
To achieve entrepreneurial goals with bank financing, temporary risk financing can be a sensible alternative. Here, the financing is directed toward a defined project. The cash flows resulting from this project secure the debt service. Combined with an appropriate equity stake in the project, viable debt financing options exist that only require the company to assume liability for a limited period.
A roadmap is essential
A well-thought-out strategy is essential for both bank-independent financing and temporary risk financing. To achieve the goal of liability-free private assets, a clear roadmap should be followed. The financial strategy should also be communicated transparently to lenders. Whether it involves bank-independent financing, private investors, or the "bank within your company," the finance experts at THE MAK`ED TEAM develop a forward-looking concept with the right financing mix – tailored to the company and the entrepreneurial family.
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