Financing & Debt Advisory

Debt financing is the most common form of corporate financing and provides means of financing for a company whose equity is either currently insufficient or already committed.

Debt financing increases the return on equity employed and thereby the profitability for the shareholders (leverage effect). Another advantage is that lenders have no say in the company. However, too much debt can put a strain on a company’s credit rating and solvency, which in turn increases financing costs.

Expansion financing relates to companies that want to expand quickly and/ or conquer new markets.

Mezzanine financing (also mezzanine capital or hybrid financing) takes its position between the voting, subordinated equity and senior debt. As such, it contains characteristics of both equity and debt capital and can be structured flexibly.
Mezzanine capital often does not require collateralization, but calls for a higher interest rate or a share in profits.

Leasing is a form of transfer of use or a rental of capital goods. Leasing contracts are similar in nature to property leases.
Leasing brings advantages such as the ability to plan costs, the preservation of equity capital, as well as the credit line and balance sheet neutrality (in the case of operating leases).

Factoring is the sale of outstanding receivables from customers, etc. to a factoring company (factor). Factoring enables companies to avoid liquidity bottlenecks when customers have long payment terms, fall into arrears, or deliberately delay payments. In the case of a true none-recourse factoring, the default risk (del credere risk) of the receivable is also transferred to the factor.

Guarantees are a generic term for surety and guarantee bonds issued by financial institutions in favor of their clients. It is an assumption of liability by a bank acting as guarantor on behalf of their client vis-à-vis a third party. The bank does not provide any liquid funds but is liable with its own creditworthiness. Guarantees in form of a letter of credit or letter of undertaking are often seen in cross-border trade transactions. Guarantee fees are generally more favorable than loan interest rates, and the assumption of liability by a reputable credit institution saves the third party a cumbersome credit check.