Corporate financing

Equity financing

Equity financing forms the foundation of a sound corporate finance structure. This type of financing strengthens your company’s independence and improves its credit standing.

Debt financing

There are various options available for debt financing. In Germany, 49% of small and medium-sized enterprises make use of external sources for their financing. Particularly noteworthy are:

• Bank loans with fixed terms
• Supplier credits for short-term financing
• Bonds for larger financing volumes

Leasing

Leasing is becoming increasingly important as an alternative form of financing. Approximately 90% of leasing volume is allocated to movable assets. This financing method allows companies to structure their investments flexibly while preserving liquidity.

Interest rate hedging

For long-term financing, we recommend a well-considered interest rate hedging strategy. We offer a range of solutions:

Financing current assets

To finance current assets, flexible corporate loans are available. Starting at CHF 20,000, companies can benefit from various financing options. Available maturities range from 1 to 12 months.

Advantages and disadvantages of equity financing

In our many years of providing financial advice, we have repeatedly seen just how important equity financing is for the sustainable success of a company. Let's look at the most important advantages and disadvantages of this type of financing.

Advantages: independence and creditworthiness

We tend to observe that companies with solid equity financing are given a much better credit score. A sound equity ratio leads to significantly improved creditworthiness and reduces the risk of liquidity shortages.

The essential advantages of equity financing are:

• Greater independence from financial services providers
• Improved creditworthiness at banks
• Greater flexibility in company-specific decisions
• Lower risk of excessive debts
• Stronger position in negotiations with business partners

A particularly valuable advantage is the greater financial autonomy: We note that companies with a higher equity ratio can act much more independently, as they rely less on debtors.

Disadvantages: high costs and investors' right to say

Despite the many advantages, we also have to consider the challenges of equity financing. Since external investors are involved in such financing, it is associated with higher costs than in traditional debt financing.

Here is an overview of the most important aspects:

Another significant disadvantage is the tax treatment: unlike debt financing, the costs associated with equity financing are not tax-deductible. This can have a noticeable impact on total costs, especially for larger financing volumes.

We also observe that the benefit of independence often diminishes when equity financing takes the form of investment financing. Investors and shareholders frequently demand extensive consideration for their capital, which can limit entrepreneurial flexibility.

In particular, when raising capital from external investors, the company’s value must first be determined. For example, if 10% of the company is offered for CHF 100,000, this corresponds to a total valuation of CHF 1,000,000. This valuation has far-reaching implications for future funding rounds and your negotiating position with potential investors.

Debt financing options

As experienced financial advisors, we know that choosing the right type of debt financing is crucial to your company’s success. Let us analyze the most important options available to you.

Bank loans

We observe that bank loans remain the backbone of corporate financing. This traditional form of debt financing offers various options:

Interest rates vary depending on creditworthiness and collateral. We recommend requesting and comparing various offers.

Leasing

Capital goods leasing is increasingly important for dynamic companies with low equity. Our experience shows that leasing is particularly attractive for:

• Technical equipment and machines
• Fleets of vehicles
• IT infrastructure
• Production facilities

Leasing conserves liquity and has tax advantages, as leasing rates are tax-deductible as operating expenses. However, you should keep in mind that the overall costs tend to be higher than with a direct purchase.

Supplier credits

A supplier credit is an uncomplicated kind of short-term financing whereby a supplier grants a client a credit by extending the usual payment due date.

A typical example from our experience: In an invoice of CHF 50,000 net (CHF 59,500 gross) due within 30 days, you can deduct a discount of CHF 1,190 if paid within 14 days. This represents a significant saving.

It's important to note that the effective annual interest rate on supplier credits can go up to 24%. We therefore recommend using this kind of financing strategically and in very specific cases.

Federal funding options and guarantees

Our expertise in corporate financing shows us time and again how important government support is for the success of many companies. Together let us explore what options are available to you.

Federal and cantonal funding programs

Both the federal government as well as the cantons are working on creating ideal framework conditions for companies. Support is given on various levels:

Particularly interesting for innovative companies is the Innosuisse funding program, which supports research collaboration projects between universities and businesses. We also recommend that our clients contact the cantonal economic development offices, as these often offer tailored solutions.

The main advantages of government support programs include:

• Reduced financing costs
• Improved creditworthiness
• Possibility to combine with other forms of financing
• Professional guidance from experts

Guarantee cooperatives

In our advisory practice, we have found that guarantee cooperatives play a central role in business financing. These government-supported organizations enable SMEs to access bank loans more easily by providing guarantees.

There are currently four major guarantee cooperatives in Switzerland:

• BG Mitte (Guarantee Cooperative for SMEs)
• Cautionnement romand (Guarantee Cooperative for Western Switzerland)
• BG OST-SÜD (Guarantee Cooperative for SMEs)
• Bürgschaftsgenossenschaft SAFFA (specifically for women)

A particularly attractive aspect: These cooperatives can guarantee loans up to CHF 1 million. The federal government covers 65% of the risk of loss and also contributes to the administrative costs of these organizations.

We recommend that our clients consider the following points when submitting an application:

Guarantee applications can be submitted directly to the relevant cooperatives. We are happy to assist you in selecting the appropriate organization and preparing the required documents.

Combining different support instruments is especially valuable. For example, a guarantee can be combined with cantonal support programs or innovation funding. This enables optimal corporate financing even for more complex projects.

How to find the optimal financing solution

At smzh, we understand that achieving optimal corporate financing requires careful analysis and strategic planning. Every day, we support companies in reaching their financing goals and securing the best possible terms.

Capital requirement analysis

Accurately determining your capital requirements is the foundation of any successful corporate financing. We recommend that our clients calculate their capital needs generously and include a buffer of approximately 25% for unforeseen events.

The following components should be considered in your capital requirements analysis:

Of particular importance is a realistic assessment of the starting phase. Our experience shows that many companies underestimate their short-term capital requirements and later require expensive follow-up financing.

Assessing creditworthiness

The creditworthiness of your company has a decisive influence on financing possibilities and conditions. We support you in systematically improving your creditworthiness:

1. Optimizing equity capital
• Target ratio for industrial companies: at least 50%
• Target ratio for trading companies: at least 40%
2. Strengthening liquidity management
• Optimizing working capital
• Efficient receivables management
• Strategic supply inventories

Online Credit makes it possible for you to apply for credit digitally and to keep an overview of your credit management at all times. This allows for efficient financing management and supports continuous monitoring of your creditworthiness.

Comparing various offers

We recommend making a structured comparison of various financing options. In doing so, you should consider the following aspects:

• Cost structure
• Effective interest rate
• Handling fees
• Additional costs for collateral
• Flexibility
• Special repayment options
• Adjustment options
• Notice periods
• Collateral
• Type and scope of requested collateral
• Valuation discounts
• Release conditions

For real estate financing, we offer special mortgage solutions that are fully tailored to your needs. Whether we are looking at a new construction, renovation, or extension, we will find a suitable financing solution.

One particularly important aspect is the documentation of your financial planning. For your loan application to succeed, you will need:

• Current annual financial statements
• Economic evaluations
• Liquidity planning
• Investment calculation
• Business plan including market and competitive analysis

Our experience shows that careful preparation of your application documents is the key to success. We support you in compiling all relevant documents and optimizing your presentation for potential financing partners.

Corporate financing should always be seen in the context of your long-term corporate strategy. Together with you, we analyze:

• Growth potential
• Investment needs
• Market developments
• Risk factors

Based on this analysis, we develop a tailor-made financing strategy that ideally supports your business objectives while ensuring that you retain flexibility for future developments.