Access to outside capital is a real problem among Start-Up CFOs. A popular witticism reads „Banks lend to those, who don’t need it.“ This is true in my experience.
A report by Dr. Lars Hoffmann, Founder and CEO/CFO of fos4X.
Tough Requirements for Financing through primary Banks
After having a positive EBIT for the first time (with approx. 3 Mio. € revenue), I directly went to our primary Banks, Sparkasse and HypoVereinsbank, to secure a new line of credit for fos4X to finance our receivables. All parties were in favor, and it would have been possible to finance about two-thirds of our accounts receivable. However, this would have only been possible under the condition that I agree to give a guarantee to personally take responsibility for the entirety of the debt.
As the founder of a company financed by venture-capital, I could not accept that. I then turned to the topic of factoring; unfortunately without success, since the interest-rates (> 20% p.a.) just aren’t reasonable – equity is more affordable these days… In the following year we aimed for 5 Mio. € revenue and even had a positive cash-flow. With these numbers, it had to work out now… but no such luck – the same problem. Directly after this, I terminated our cooperation with the Sparkasse.
Access to outside capital through the Deutsche Handelsbank
Luckily, there is now some movement in the market. With the Deutsche Handelsbank (https://www.handelsbank.com) someone is finally attending to the problem of access to outside capital for young companies in Germany. My experiences with the Handelsbank have been decidedly positive, which is why I want to discuss them here.
Competent Partners and Problem-solvers
I met Florian Weinkauf from the Deutsche Handelsbank at a seminar from the Deutsche Börse Venture Networks (http://www.venture-network.com/dbvn-de/), and we immediately took a look at our new BWA during the break. After a few minutes he assured me, that we’ll find a solution. After a personal meeting in Munich and the subsequent verification in our data room, I had an offer two weeks later.
I can give a further recommendation for our advisor Corinna Ruppel from CDR Legal (https://cdr-legal.de): she examined the contracts with a sense of proportion and supported us competently.
My summary: it certainly helped, that we have been EBIT positive two years in a row, and also, that we have a positive cash-flow. I’m also convinced, that the Handelsbank looks for solutions to supply start-ups with outside capital, also under different circumstances.