Municipalities finance more short-term and diversified
Kleinmachnow, 03 March 2022 – Low interest rates are a welcome opportunity for German and European municipalities to finance upcoming tasks. In addition, many treasurers are saving money by taking out very short-term loans. “Moreover, municipalities no longer want to depend on one or a few large financiers, but use several contractual partners,” says EDS founder and CEO Sebastian Bergmann.
Low interest rates are positive for many municipalities, as some projects can be implemented with significantly lower interest costs. And the financing of current expenditures also becomes cheaper. “To save even more, many municipalities have meanwhile switched to taking out several short tranches per year for cash loans instead of, say, one tranche for twelve months,” says Bergmann. These loans would then be prolonged several times, each time at the then valid short-term conditions.
“In recent years, municipalities have learned to handle scarce funds very efficiently,” says Peter Hoffmann, Co-Founder and CTO at EDS. “This precisely includes shortening the borrowing period in order to take advantage of the lower interest rates on short-term loans. “This approach is now firmly established,” says Hoffmann.
At the same time, the municipalities rely on not only approaching one, large financier. “It is completely normal to get offers from several houses, compare them and negotiate the conditions,” says Hoffmann. In this respect, the diversification of municipal lenders is in full swing. “More and more, municipalities are also opening up to platforms,” says Hoffmann. “The fully digital handling of processes makes it possible to save costs once again, this time on their own administrative side.”
Overall, the municipalities show themselves to be very open to innovations. “The treasurers in particular are happy to go the one or other extra mile to get even better conditions,” says Hoffmann. “The comparability of offers through digitalisation makes it possible to make much better decisions in a shorter time.”