Quo vadis liquidity? Corona-stricken companies under pressure to act

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Currently, most companies still have sufficient liquidity or solid liquidity cushions, but an uncertain time is again ahead. If the required minimum turnover is not achieved in the coming year, with or without bridging aid, it will therefore be financially difficult for many businesses to survive.

Therefore, from today’s perspective, it is absolutely necessary to deal with this problem at an early stage in order to prevent worst-case scenarios.

Whether it is a Corona fast loan or alternative financing solutions – what do possible solutions look like? What room for manoeuvre is there?

A lack of guests and a shortage of skilled workers – what impact does this have on liquidity?

At the moment, most companies still have a solid liquidity cushion from the bridging aid III or III Plus. But in view of the pandemic and the resulting decline in capacity utilisation, these are quickly depleted. The shortage of skilled workers has also prevented many businesses from operating at full capacity, which has also dampened turnover and prevented additional liquidity cushions.

Over the winter until well into 2022, companies in the catering and hotel industry in particular will have to contend with sharp declines in turnover, fluctuating sales and ongoing costs. Liquidity cushions will then be quickly depleted and – much more risky for the business – may not be sufficient to cover financial losses.

Liquidity – the be-all and end-all for staying viable

In order to remain viable and able to act, liquidity is therefore a top priority. Liquidity ensures solvency and avoids a possible crisis or even insolvency. However, if the existing liquidity is depleted through losses and there are no longer sufficient own funds, things get tight very quickly.

Even if the government launches new economic aid, it is only of temporary use and is likely to eliminate only the most severe liquidity bottleneck. However, the risks of reduced capacity utilisation and declining sales due to Corona or a lack of staff remain.

Our recommendation: Scenario planning and optimisation of the financing structure as a basis

One way to address the problem at an early stage and in a solution-oriented manner consists of several steps:

• Firstly, despite all the uncertainties, draw up a profitability and liquidity plan for the current winter and the coming year. This planning is based on different scenarios, for example: capacity utilisation close to 0 %, partial closure, economic aid coming/not coming, turnover fluctuating in 2022, costs increasing by x %, etc.
• On the basis of this planning, it can be derived how your company will develop next year and what effects this will have on your liquidity. From this, a possible capital requirement can be derived, which can then be absorbed through financing, an increase in the current account line or a suspension of repayments.
• At the same time, your current financing situation should be examined to find out whether your company meets the requirements for further financing measures. If these prerequisites are not yet in place, there is still time to work them out.

Which solutions are available?

Currently, businesses that have determined their capital needs can easily apply for a Corona fast loan and thus reduce their liquidity pressure with foresight.

No collateral is required for the quick loan, as 100% liability is assumed. Furthermore, up to 2 years of grace are possible. Businesses wishing to take advantage of the fast-track loan must meet a few access requirements.

IMPORTANT: Applications for Corona fast loans must be submitted by 31 December 2021 at the latest! Therefore, please contact us as soon as possible.

(UPDATE FROM 8 December 2021: The deadline for submission has been extended to 30 April 2022).

Alternatively, various financing solutions are available from your house bank. However, planning as a basis for action is the minimum requirement for this.

We would be happy to discuss your individual options with you without obligation in an initial meeting.

Furthermore, our advisory services are in many cases eligible for a 50% subsidy from the BAFA (Federal Office of Economics and Export Control) and can be included in the bridging aid III Plus. In this way, you receive professional advice and support at a low price, but with a great effect.