From trainee to boss

Successor urgently needed! The skilled trades are getting on in years. However, many older business owners are struggling to find a successor.

This article is part of the special feature GründerNavi – for founders and young companies

One problem with finding a successor is that there simply isn't enough potential candidates. The shortage of skilled workers is a key issue. Furthermore, starting a business – even with persistently low interest rates – is usually no easy feat. However, what some people don't realize is that a well-planned succession doesn't have to fail due to a lack of collateral. The solution is a guarantee.

From trainee to boss

Jennifer Ernst followed this path as well . The 34-year-old goldsmith recently took over her apprenticeship business on Friedrichstrasse in Düsseldorf. The fact that the young woman was able to acquire the long-established goldsmith Klaus Feld from the previous owner was due to her thorough preparation, a sophisticated business plan, clever financing – and also to the support of the NRW Guarantee Bank . The bank guaranteed two loans from NRW.BANK (liability for liabilities). This cleared the way for the takeover and thus the continued existence of the Düsseldorf goldsmith, which had been in business for over 30 years. And the former apprentice is now the owner.

The NRW Guarantee Bank steps in whenever founders or entrepreneurs have developed an exciting project but lack the collateral needed for a loan to finance it. This was also the case for Jennifer Ernst. "Without a guarantee," admits the master goldsmith and silversmith and state-certified designer, "I wouldn't have been able to manage this investment." After all, it involved a six-figure sum. With the guarantee, she was able to easily provide the necessary collateral. Moreover, the guarantee gives her a significant advantage with the lending bank: that the acquisition deal had been thoroughly vetted by experts who then gave it the green light.

Crafts and financing with tradition

Individuality is key. Master craftswoman Ernst's gold and silversmithing is as individual as the support provided by the Guarantee Bank. Her range includes unusual pieces of gold and silver jewelry, which can also be custom-made to the customer's specifications. Creativity knows no bounds. Jennifer Ernst not only continues the tradition of renowned goldsmiths. She also cultivates a rare artisanal technique: granulation. This involves melting tiny spheres (granules) of the precious metal onto a flat or curved metal surface to create ornaments – without the use of solder. "It's incredibly laborious work," says Ernst, "which very few goldsmiths offer these days."

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Business takeover as an opportunity for self-realization

Guarantees also have a long-standing tradition in finance. The origins of this financial instrument are said to date back to the Babylonian era. What's special about the Bürgschaftsbank NRW, a self-help institution for businesses, is that it steps in as a guarantor whenever a promising concept is on the table, but the initiators don't have sufficient collateral to obtain a loan. The Bürgschaftsbank NRW assumes up to 80 percent of the credit risk, with at least 20 percent remaining at the principal bank's own risk.

If needed, the special craft program of Kapitalbeteiligungsgesellschaft NRW mbH (KBG NRW), a sister company of the Bürgschaftsbank, offers additional support. With its two focuses on "succession" and "future," the special program covers both business takeovers and future investments with particularly favorable silent partnerships. This allows interested parties to integrate silent partnerships into their financing plan up to the amount of their existing equity (max. €100.000). Silent partnerships ensure a balanced financing structure, protect company liquidity, improve creditworthiness, and thus also the company's rating.

How a guarantee works

The guarantee bank always focuses on the potential economic opportunities of a company and relieves credit institutions of the burden, especially in start-up and succession projects, while the entrepreneur remains personally liable.

Checklist: What applicants should know

• Any founder, entrepreneur, or freelancer can apply for a default guarantee. It must be a small or medium-sized business.
• You need appropriate personal, commercial and professional qualifications for your field of activity.
• A business plan with an economic forecast is required, which proves that the business operations can generate capital service and a reasonable living.
• The applications are usually processed through the house bank, but guarantees can also be applied for directly at the guarantee bank (BoB = guarantee without bank). Applications can be made at www.bb-nrw.de.
• The maximum guarantee amount is 1,25 million euros.
• Costs: Upon approval, a one-time processing fee (usually 1,5 percent of the guaranteed loan amount, with a minimum of €400,00) and an annual guarantee commission, depending on the level of guarantee, are charged. It ranges from 0,7 to 1,5 percent. Furthermore, involving the guarantee bank usually results in better loan terms.
• Guarantees are available for almost any project and plan, provided the prospects are right. Exceptions are restructuring measures, debt restructuring, and measures that are not eligible for aid under EU competition rules. If additional equity is required, the Guarantee Bank recommends the involvement of KBG NRW (www.kbg-nrw.de).

Further information on the products of the guarantee bank can be found at: www.bb-nrw.de