Loans – US credit crunch hits a small German company

Could the turbulence on the financial markets sparked in part by the sub-prime mortgage crisis in the United States have repercussions in a place as improbable as the northern German village of Schuby? The Böttcher family, who own a company that manufactures cranes and components, didn't think so. But now Jan Böttcher is feeling the crunch. Our subject in cooperation with Handelsblatt. Although, with its order books full, the medium-sized company Kühnezug has little reason to worry on that account - others have been hit harder. The credit information agency Creditreform says small businesses and consumers in particular will find it more difficult to obtain loans. But another aspect of the global effects on banking has hit Kühnezug. The family's mortgage was sold on without their knowledge. Now they are no longer customers of Hypo Real Estate, but of ING Diba. What does that mean for them? Have the terms of their contract changed? Jan Böttcher's confidence in the banking system has been shaken. He has decided to accept slower growth, and finance it himself. --------------------------------------------------------------------- The CEO Jan Böttcher looks on as his anxious clients catch a first glimpse of their new crane. The heavy machinery is still on the factory floor. A Dutch factory has paid some 600,000 euros for it. Jan Böttcher explains: "I have to clarify that because I know a few things were intended for this crane – in case they've left that off, because they think the rubber blade is different." In this case the buyer had no problem getting a loan. Yet Jan Böttcher has observed that many of his customers are having a tough time finding financing: "We have a few clients who are having problems getting loans through for contracts they've already got, for investments they need to make to fulfill these orders. These are long-time customers. We can't see why they shouldn't get credit. Rather it's a problem of the banks not wanting to hand out money." For cranemaker Kühnezug and it's 50 employees, it's a warning signal when clients are forced to cancel orders. They're concerned, even though business is still good. The family-owned firm is an established company, but Jan and Marc Böttcher are still cautious. The two brothers are financing their new annex without any help from the banks. They've had bad experiences in the past: "Clearly at some point we expect the bank to stand by us, as partners. It's about being a partner, not just a number. And with the big banks you run the danger of just being a number." We ask the two brohters how they view the current developments, the financial crisis? CEO Jan Böttcher: "Clearly it's worrying. We don't notice anything ourselves, but sure it's worrying. They earn money off us and then let it go up in smoke, senselessly." Business information services agency Creditreform says one in three medium-sized companies is already feeling the pinch. And for those who don't have enough of their own capital things can only get worse. Hans-Ulrich Fitz of Creditreform explains the consequences: "The result could be that the trend of recent years towards fewer bankruptcies would reverse and we'd see more bankruptcies again." In the northern German town of Schuby, it's not just the credit crunch that's causing a stir. Just recently Jan Böttcher discovered that Hypo Real Estate had sold on the old loan on the company's premises: "We weren't even aware that banks could simply sell a mortgage loan on – especially because we had consciously chosen our partner. And now we have to work with someone we don't even know and who's not of our choosing. At first we were very surprised and not very happy about it." Jan Böttcher has lost much of his confidence in the banks. So he's decided that Kühnezug will go it alone. The firm will fund its own growth – even if that slows progress: "Sure we could do it faster with a bank's support and it would create more jobs, too. But it could also endanger current jobs and we don't want to run that risk." No confidence, no risk-taking. If many businesspeople adopt the Böttchers' mindset then the financial crisis looks set to severely stunt growth.

DW-World | January 29, 2008

Tags:. .signal. .observed. .intended. .buyer. .faster