The Need for Liquidity Companies’ is Increasing

Working Capital as an Internal Financing Source

For a long time, obtaining sufficient liquidity was not a problem for many companies. Interest rates were low, economic conditions were stable and many companies were profitable. The default risk for banks was low and the willingness to lend high. This has changed significantly since the war in Ukraine:

1. Inflation with, among other things, highly volatile energy costs reduces profits and increases the need for liquidity to cover running costs. More money is also needed to finance inventories and receivables from customers. The cost spiral has slowed down somewhat – but the new wage rounds indicate high settlements and thus further cost increases. Experts expect it to take several years to return to the low inflation rates that we were used to.
2. In times of great uncertainty and increasing risks (VUCA world), companies must increasingly build up financial reserves in order to remain responsive.
3. Additional investment needs arise in the following areas:
      – Increasing productivity through automation and digitalisation to compensate for cost increases and address the shortage of skilled workers
      – Meeting the growing requirements in terms of sustainability
4. At the same time, banks are becoming much more restrictive in granting new loans, and the higher interest rates are putting companies with high levels of debt financing under increasing pressure.

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