Industrial clearing

On the industrial credit market, in addition to the advance payment and the supplier credit, other forms of raising funds are also possible, which are in direct competition with bank credits and lead to substitution processes to the detriment of banks. These forms of borrowing can be referred to as raising funds in the context of industrial clearing, although a clearing system is initially understood only as an arrangement of payment transactions. In the case of industrial clearing, a distinction is made between the classic form and the newer variant.

In the classic form of industrial clearing, two companies with operational relationships agree on a variation of payment dates, d.h. a supplier with temporary financial resources needs negotiates with one of its buyers with temporary financial resources surplus about bringing forward the due fees for the products traded between the counterparties. The supplier receives the amounts due anyway earlier than originally planned, so that the cash conversion process is accelerated. This early payment, which can also be interpreted as a trade credit, thus substitutes financial borrowing from the bank credit market. It should be noted that the supplier (borrower of funds) wants to pay less for the received advance payment as borrowing from the industrial credit market than for the interest from the current account, bill discount or other fixed-amount credit markets. On the other hand, the buyer (financier) would like to receive more for his advance payment made as an investment in industrial clearing than in the case of a short-term investment on the bank market on the basis of money market conditions. Between the comparative interest rates of the two sides of the market there is a range of agreement of considerable range, and the respective reference interest rates of the other side are not mentioned. However, the agreement is usually not reached on interest rates, but on price modifications in relation to the traded products, so that the interest rate for the provision of funds is converted into price changes. In the context of this phone-only market, the bottom line is that the funding supplier receives less revenue for the products it sells and the funding buyer has a lower cost for the products it procures. The banks thus miss out on a credit transaction with the supplier and an investment transaction with the customer. The bank margin between the two reference interest rates is divided between the counterparties according to their negotiating skills and market power. Although the business formally consists only of a variation of payment practices and there are no transactions beyond the amounts traded operationally anyway, it should be noted that in industrial clearing, fixed-amount loans are in fact traded which are not flexible within the scope of the agreed term.

The newer variant of industrial clearing is also a telephone market in which first industrial addresses without operational relationships lend each other large volumes of funds for short to medium terms on the basis of money market conditions. In this respect, this form of industrial clearing is to be regarded as a money loan within the framework of the systematization of short-term debt financing listed above, as there are no operational relationships involved. The minimum amount traded is 10 million euros. €, with many times this amount being reached in the course of individual transactions. All possibilities from one day to one year are traded as maturities, so there is less standardization than in the bank loan market. The agreement of counterparties is made directly on interest rates. The quite considerable agreement band between the bid-ask rate (higher supply rate) and the bid-money rate (lower demand rate) of the banks is shared by the companies. The initial interest rates used to reach agreement are those used in interbank trading. It should be noted that this form of industrial clearing also substitutes for corresponding banking transactions and thus constitutes a banking transaction within the meaning of the German Banking Act (Kreditwesengesetz). In practice, however, ignoring the consequences of this, a gray zone has developed which makes the bank credit market dispensable for first industrial addresses in normal times of demand. The term of short-term borrowing can be set in accordance with the desired duration in consultation with the counterparty and prolongation is unproblematic due to the enormous market volume. In this respect, a loan within the framework of industrial clearing is associated with very low costs and a high degree of flexibility with regard to the term.