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30 July, 2022

Written by Beat Waldvogel

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With your customer structure, you are aware that a distribution of risks is indispensable. You are also aware that it is the same with suppliers. Who wants to bear such risks as a company or business? Exactly.
But why do many companies bear precisely this risk when it comes to financing? SMEs often pursue a one-bank strategy. With the not inconsiderable risks.

So what does this have to do with WCM (Working Capital Management)?

As in any strategy, the first step is a question of risk. Most of the time, the SME is happy to have a financing partner. The question of what happens if ……. is not asked. Does the same question apply here as in road traffic, & I’ve been driving accident-free for 10 years now, nothing will happen”, or should one think about it and act early as a responsible entrepreneur? Alternative options to traditional bank financing should be considered. This is also in the interest of the company.

What alternatives are there to bank financing?

The choice of alternative also coincides meaningfully with the choice of strategy of the company. As a company, it makes a difference whether I finance growth or the shareholder structure, so the choice of financing option is essential.

In the case of classical corporate financing, common variants as an alternative to the bank limit are the financing of debtors or the financing of creditors (whereby demands are also made here on the creditworthiness of the company).

Besides banks, there are various lending platforms or crow-funding platforms. However, these are close to banks in terms of security. This means that concrete needs a corresponding credit rating according to Basel III, otherwise these platforms cannot finance. It is difficult to obtain additional limits via these platforms.
The simplest form of financing besides traditional bank financing is and remains the sale of receivables. Independent of debtors or creditors. In these models, creditworthiness is measured against the debtors. Of course, there are also questions about one's own creditworthiness in this type of financing, but this is not decisive.

What did alternative financing options cost?

The nimbus of high costs is relatively easy to shatter. Of course, financing costs money. However, with the alternatives, the costs are also dependent on the creditworthiness of the company. That is normal, you do it just like that, customers who pay quickly and well have different conditions than notorious late payers.
In the classic variant of debtor or creditor financing, a value of between 1.5 – 2% of the total volume applies, depending on the size of the financing. However, these costs become relative when you compare it to the ROI and the additional liquidity. The advantage of this financing is the congruence of turnover. If you add the savings in purchasing, it is an improvement in the figures in most cases.

What use is alternative financing to us?

Liquidity means a head start – we are all aware of that. But let’s take a simple example to show what this really means for a company.

Assuming the company has an additional limit of CHF 300,000, the company now consistently uses this to pay the creditors immediately and thus receives a cash discount of 3%. This makes an additional income of CHF 108,000 per year (12 x 3% of CHF 300,000), minus (calculated as an example 3%) a net income of just under CHF 100,000.

Apart from the additional income, you as a company now also strengthen the bond with your suppliers. With your suppliers, too, those who pay quickly and well will be given preferential treatment or perhaps receive other discounts.

In addition to the pure sale of receivables, modern companies today also offer SCF solutions (purchase financing). Here, too, the advantage is obvious. The entire working capital is financed by these companies. As this is asset-based with good companies, you hold all the trump cards. Your creditors are paid immediately, which in turn gives you better conditions and usually a higher priority with the supplier. The ROI of your company improves sustainably and the question of how to finance the next project is solved. The liquidity at the bank is extremely spared, as this financing model is an asset financing and the factor takes over the work of the bank.


A review of the financing strategy is always worthwhile. Work out alternatives, it is always worthwhile for the company either to have additional limits or to spread the risk.