Dynamic financing helps SMEs in Switzerland access new liquidity

SMEs Switzerland: New liquidity through dynamic financing.

SMEs in Switzerland were hit hard by the coronavirus crisis, leading to financial difficulties for some. Eric Balmer, Head of Financing Solutions at Credit Suisse, reveals at the 2020 Entrepreneur Conference how dynamic and innovative financing can help with the acquisition of new liquidity.

SMEs in Switzerland are reaching their limits when it comes to liquidity

It is a turbulent operating cycle for Switzerland. Due to the coronavirus crisis, the local economy experienced a historical contraction in the second quarter. Now, around eight months after the outbreak of the coronavirus, the economy has somewhat recovered.

For many small and medium-sized enterprises, however, the difficult situation is still far from over. They are reaching their limits with the existing liquidity.

Significant support for SMEs in Switzerland

As we have seen with past economic crises, the coronavirus crisis will probably also lead to mergers and acquisitions. Companies will be bought up or taken over by new investors. With limited liquid assets, companies are event more reliant on external financial assistance for these processes.

"It is important that we as a bank support affected SMEs with acquisition financing for possible consolidations," explains Eric Balmer, Head of Financing Solutions at Credit Suisse and one of the renowned speakers at the 3rd Credit Suisse Entrepreneur Conference. This should ensure that companies can still develop despite the crisis and that jobs are preserved. He expects the process to further accelerate in the next 12 to 18 months.

COVID-19 credit helps with the temporary liquidity shortage

The Federal Council takes on a decisive role in the financial support of companies. The COVID-19 credit, with a 100% federal guarantee for a maximum of CHF 500,000, ensures that SMEs can temporarily counter the liquidity shortage. "With the COVID-19 credit, a very important step has been taken for the Swiss economy," says the expert.

However, the credit is not suitable for the long-term prevention of liquidity shortages. Since credits granted before the crisis are potentially used up, the company has very little leeway for future investments and any adjustments to the business model. Potential growth opportunities after the crisis could therefore be missed. "In order for future investments to be possible, companies must rely on dynamic and innovative financing models," according to Balmer.

Diversification in financing is necessary

So far, many companies have relied on the classic operating loan for new purchases. Due to the current situation, however, this type of financing no longer appears as the best solution for some SMEs.

"Despite the ongoing crisis, there are alternatives for companies," the financing professional states optimistically. Instead of focusing on just one source of financing, different types of financing can and should be taken into consideration. "A broad-based financing mix is great advantage, especially right now, since it allows entrepreneurs to retain a certain flexibility," says Balmer.

"Dynamic financing gives banks security"

A broad-based financing mix helps companies create fresh liquidity while simultaneously acting as a hedge for banks. "In the current environment, where visibility into the future is severely restricted, banks are no longer granting loans to the same extent as before. Collateral decisively influences a credit decision and therefore the realization of investment and expansion plans," says Eric Balmer, adding: "It is very important to me, during the Entrepreneur Conference, to show our clients in the SME segment the two dynamic and innovative financing models with which they can create fresh liquidity."

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