Access to flexible capital resources is a key precondition for the acquisition of critical technologies and equipment. Yet part of the capital that is theoretically available to European private sector businesses currently lies frozen within these companies and is therefore not employed efficiently.
The research paper published by Siemens Financial Services examines current developments in corporate financing, calculates the share of frozen capital, and rates different methods of releasing this capital. The report shows that companies in the five major European economies (Germany, Italy, France, Spain and Britain) as well as the United States spent EUR 409 bn. on purchasing of business equipment in 2007, instead of acquiring that equipment through a financing plan. Within Europe, Germany claimed the top spot with just under EUR 72 bn. Added to this must be another EUR 386 bn. trapped in late invoice payments (Germany: nearly EUR 57 bn.).
This inefficiently employed working capital could be freed through alternative financing methods to compensate for tightened credit lines and enable investments in growth strategies. Rather than acquiring plant, vehicles and other equipment through direct purchase, companies should finance such objects with modern methods such as leasing or rental agreements. Particularly in times of economic uncertainties, these financing methods can make a substantial contribution to improved working capital and cash flow management, thus protecting companies’ competitiveness.
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