Liquidity bottleneck and loan to bridge the gap
Liquidity or solvency plays an important role in both business and private life, whether it is to pay bills, cover the cost of living or secure ongoing business operations, repay loans, settle tax liabilities or achieve growth.
In the business sector, financing gaps (a liquidity bottleneck) and a lack of controlling are the two main causes of insolvency. If liquidity is only at risk in the short term due to a shortage of available funds, for example due to a customer defaulting on payment, there are various options for credit financing.
Sufficient collateral, a good credit rating and solid equity are generally helpful for banks to approve a traditional loan - also because this improves the interest conditions.
Loan financing is an effective means of bridging a liquidity bottleneck or increasing equity. Below you will find out how you as a company or private individual can regain the ability to meet your payment obligations on time and what you need to bear in mind.
Measures to bridge a liquidity bottleneck
There are various ways to improve solvency and the level of the liquidity bottleneck in order to create liquidity. As an entrepreneur, there are several points you can address in terms of sustainable liquidity planning that will give you room to maneuver again.
In liquidity management, it is primarily differences in the maturity of the measures that determine which measure can be classified as helpful in a specific liquidity bottleneck.
Drawing up a liquidity plan is essential in any case to ensure that you as an entrepreneur do not lose sight of your income and expenditure and that your liquidity ratios (1st - 3rd degree) are positive.
In the event of a liquidity bottleneck:
The first and general measure to improve your liquidity in the short term is to prioritize existing expenses or impose a spending freeze.
You can then proceed to the following points.
Use fixed assets to generate liquidity
- Sale of non-operating assets
- Use of deposit credit with the option to continue driving vehicles
- Leasing of fixed assets
- Leasing instead of buying
- Outsourcing of services
Optimize inventories to eliminate the liquidity bottleneck
- Stocktaking and reduction of inventories
- Optimize ordering
- Shift warehousing to suppliers or customers
- Special sale
Improve receivables management
- Invoicing after services rendered
- Optimize dunning process
- Minimize payment terms for customers
- Claim partially completed services via partial invoice
Strengthen equity or use private funds to secure liquidity
- Increase private deposits (if possible)
- Reduction in private withdrawals
- Pausing or terminating life insurance policies
- Expanding the circle of shareholders
This is just a selection of measures that you can take to secure or improve your liquidity. With some of the measures mentioned, you can also avoid a liquidity bottleneck in the short term, which will also have a positive effect on your ability to pay and act in the business area in the long term.
Tight receivables management is therefore an effective means of increasing your liquidity: For example, issue invoices immediately after services have been rendered, regularly check outstanding receivables and issue timely and proper reminders if customers have not paid their invoices on time! In this way, liquidity bottlenecks caused by outstanding receivables through no fault of your own can be directly avoided or reduced.
One way to optimize receivables management is factoring, for example, but this is only worthwhile from a certain size of business and turnover. Factoring is a financial service in which a company sells its outstanding receivables to an external service provider (factor) in order to obtain immediate liquidity and not have to worry about receivables management itself.
Another way to improve your solvency is the (possibly temporary) monetization of fixed assets. This means that you sell machines, vehicles and the like that are no longer or only rarely used. However, if you still need your vehicles for your day-to-day business, Pfando's pawn loan with the option to continue driving is a good solution for quickly obtaining money to bridge liquidity bottlenecks and continue generating income.
In some cases, it also makes sense to check the stock in your own warehouse and reduce it through special sales campaigns. Depending on how urgent your financial situation is, it is worth making several adjustments in order to achieve noticeable effects in securing liquidity as quickly as possible.
Create liquidity by selling/leasing non-essential assets
One option for improving your solvency in the short term is to sell and/or rent out non-essential assets. For example, if you have a property that you use partially or not at all, you can sell or rent it out. The situation is similar with fixed assets such as machinery, vehicles, furniture, PCs and buildings. As the owner, you can act flexibly in such cases and quickly increase your equity and liquidity by selling or renting them out.
However, a problem arises if the assets are relevant to the operation of your company. In the case of vehicles and machinery, Pfando's pawn loan is a fast and flexible alternative to selling. Within a short period of time, you receive the maximum possible amount as a pawn loan for your company vehicles (e.g. also construction or forestry machinery) - but then continue to use them.
Uncomplicated liquidity thanks to Pfando's pawn loan
Pfando's pawn loan with the option to continue using the vehicle offers you a twofold advantage: you receive cash quickly and easily, improve your liquidity immediately and can continue using the machine or vehicle straight away! With the usual pawn shop, on the other hand, you would have to hand in the valuable item, look for a cheaper alternative or improvise in some other way.
Another advantage of the Pfando pawn loan is that only the value of the item you want to borrow against counts - so there is no need to check your creditworthiness with the KSV. This model of financing for private individuals and companies is therefore unbureaucratic, very fast and allows you to remain flexible. In the event of a short-term lack of liquidity, you can quickly consolidate yourself or your company in this way. You can use your vehicles and machinery productively, draw money from the accumulated value and service current payment obligations and liabilities at short notice.
What belongs to equity?
Equity is essential for the financial stabilization of a company and for bridging short-term insolvency. For example, if you want to take out a loan, banks generally require an equity ratio of around 30% of the requested loan amount. It is not always possible to meet this requirement from your own funds - but there are options for increasing your equity. We will go into this later.
But what actually counts as equity? According to the definition, equity is all potentially available assets less any liabilities. This includes the following assets, among others:
- (Unencumbered) land or real estate
- Cash and balances in savings and current accounts
- all types of securities
- Surrender values of concluded life insurance policies or home loan and savings contracts
- Receivables due from third parties
- Money from allocable home savings contracts
- Gifts and advance inheritance
- Loans from relatives or employers
- Maturity benefits of life insurance policies (directly before maturity)
- If applicable, grants and loans from public funding (KfW, state funding)
- Own work, if applicable
How to use hidden equity
Before you take out a loan from a bank as a private individual or entrepreneur, you should make a precise inventory of your assets and take any liabilities into account. Only when you have an overview of your assets, for example property, savings deposits, securities, life insurance policies, etc., and your payment obligations, can the amount of your equity be accurately determined.
The higher this is, the better your chances of obtaining a loan on good terms. This is because the better the liquidity ratio and the higher the equity, the more favorable the interest rates for borrowers.
As a rule, credit institutions such as banks assess the eligibility for a loan according to key figures such as the amount of your income, your creditworthiness (see Schufa score) and the collateral you provide.
Of course, the degree of your liquidity also plays a role: the assessment includes the ratio of liquid assets to current liabilities(cash ratio, 1st degree liquidity), the ratio of financial assets plus securities and current receivables to current liabilities(acid test ration, 2nd degree liquidity) and the ratio of current assets to current liabilities(current ratio, 3rd degree liquidity). Improve your liquidity easily with Pfando's sale-and-lease-back principle and turn available funds into cash!
Good liquidity levels and a certain amount of equity are therefore helpful and advisable when purchasing a property or buying a house - because if you can no longer service the loan installments due to unemployment or a slump in your business, for example, you will quickly find yourself in a spiral of illiquidity (inability to pay). In the case of a house purchase, this can mean that the bank will sooner or later take your house and throw you out the door.
To increase your equity share, you can use the sale-and-lease-back principle to sell an asset such as your car or another vehicle that you own and then lease it. You can then use the amount paid out as equity. This improves your liquidity and also your chances of financing your own home or getting your business back on a secure footing quickly!
Receive cash within 60 minutes and continue driving your car
- Immediate cash (today)
- TÜV certified
- Highest payout amounts
- The credit alternative –
even with a negative credit bureau entry - 60+ locations in Europe
- Trained customer advisors
- On site and always available for you by phone
- Verified contracts
Receive cash and create liquidity thanks to Pfando!
As the market leader for short-term liquidity, Pfando is your number 1 contact in the event of a liquidity bottleneck. With us, you can get cash in 60 minutes at one of our more than 60 branches across Europe and continue using your vehicle or machine straight away! Regardless of whether you come to us as a private individual or an entrepreneur - we are there to provide you with competent advice and support!
The prerequisite for a successful appointment is that you bring the necessary documents (à checklist to download) for the vehicle you wish to turn into cash. After a professional appraisal of the vehicle by our trained staff, we will make you a free offer. Do you already have a comparative offer from the competition? Bring it with you - we will beat it!
Make an appointment now, receive the maximum possible payout amount for your vehicle within 60 minutes and continue driving straight away! Bridge the bottleneck in your liquidity and come to Pfando - increasing equity for credit in the short term can be so easy and unbureaucratic!
The Pfando principle explained in brief
Creating short-term liquidity for private and business customers
Private customers
We at Pfando offer private individuals with an acute need for money an individual and flexible solution. We know that the reasons for a liquidity bottleneck can be varied. For example, have you lost a legal dispute or have other private debts? Is there an accident-related payment default in the case of self-employment or is a tax refund due?
Do you have a payment default in your company and want to secure continued payment of wages?
Business customers
Even a short-term inability to pay can mean the end for a company: many business owners get into financial difficulties due to an unexpectedly high advance tax payment, especially when the tax calculation is switched from back payment to advance payment after the 3rd business year. If continued payment of wages is not possible for several months, you may lose employees and a recovery from the liquidity problem becomes increasingly unlikely. In such cases, we at Pfando’s cash & drive GmbH help business owners to quickly restore liquidity and secure continued wage payments.
What our customers say
Everything was very relaxed. The advisor was very friendly, competent and courteous. After we had clarified all the formalities, the check arrived within the next 30 minutes. [...]
After the application was processed very quickly, I had the money in my account less than 3 minutes later. And I was rid of my worries. [...] The best thing is that I can continue to drive my car.
I have been a Pfando customer for a long time and have used their services several times at certain intervals. The good thing about Pfando is the fast and uncomplicated processing to get money quickly at short notice.
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