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Trade and Project Financing

Methods of Payment

The majority of import transactions by German customers, especially those involving large German distributors, take place under seller-buyer terms, such as the common 30/60/90-day accounts, or payment against documents. The electronic funds transfer (EFT, equivalent to SWIFT or wire transfers) is the most popular payment mechanism by which German importers remit payment to their U.S. suppliers is, and is the fastest and cheapest way to transfer funds. Current technology makes online transfers reasonably secure and transparent.

The letter of credit is still used in some industry sectors but now covers a fraction of total imports, largely due to its cost and time requirements as well as the ease in obtaining credit ratings in Germany, which increases transparency and transactional safety. L/C’s for payments under USD 5,000 are almost unknown in Germany. U.S. exporters may also encounter Bills of Exchange (Wechsel), usually payable within two or three months, however this antiquated payment mechanism is also passing from the scene. Cash-in-advance is also rare in German import payment.

Both private and public credit insurance are available in Germany. Euler Hermes (German), Coface (French) and Atradius (Dutch) are among the private providers (which also offer ranking and scoring services), and the main public insurer is the Staatliche Kreditversicherung (Hermes-Bürgschaften), which is administered by Euler Hermes and is used to cover German exports to countries with high political and country risk.

Overall, German firms continue to enjoy a relatively good reputation for their payment practices and management of credit. Critical industries for U.S. exporters are construction, furniture, paper and publishing. Default risk is somewhat higher for firms in unevenly performing eastern Germany. The U.S. Commercial Service Germany offers the International Company Profile as a tool to help evaluate the creditworthiness of potential customers or partners and recommends that U.S. exporters consider normal, prudent credit practices in Germany in all transactions.

The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States. The Ex-Im Bank's mission is to assist in financing exports of U.S. goods and services to international markets. The Ex-Im Bank enables U.S. companies -- large and small -- to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy. The Ex-Im Bank does not compete with private-sector lenders but instead provides export-financing products which fill gaps in trade financing. The bank assumes credit and country risks that the private sector is unable or unwilling to accept and helps to level the playing field for U.S. firms by matching the financing that other governments provide to their exporters. The Ex-Im Bank provides working capital guarantees (pre-export financing), export credit insurance, loan guarantees and direct loans (buyer financing), primarily focusing on developing markets worldwide. For further information on Ex-Im Bank's objective and programs, please see the website.

Banking Systems

Germany has a non-discriminatory, well-developed financial services infrastructure. Although corporate financing via capital markets is on the rise, Germany’s financial system remains mostly bank-based, with bank loans serving as the predominant form of funding for firms, particularly the small and medium sized enterprises of Germany’s famed Mittelstand.

Germany’s universal banking system allows the country’s more than 36,000 bank offices not only to take deposits and make loans to customers but also to trade in securities. There are no reports of a shortage of credit in the German economy. Credit is available at market-determined rates to both domestic and foreign investors, and a variety of credit instruments are available. The traditional German system of cross-shareholding among banks and industry, as well as a high rate of bank borrowing relative to equity financing, allowed German banks to exert substantial influence on industry in the past.

Germany has a modern banking sector but is considered “over-banked,” as evidenced by ongoing consolidation and low profit margins. The country’s so-called “three-pillar" banking system is made up of private commercial banks, cooperative banks, and the public banks (savings banks or Sparkassen, and the regional state-owned banks, or Landesbanken). German banks’ profitability is increasingly under pressure given the very low interest rates, high cost structures and increasing compliance costs as a result of new regulation and supervision.

Private banks control roughly 30% of the market, while publicly owned savings banks partially linked to state and local governments account for 50% of banking transactions, and cooperative banks make up the balance. All three types of banks offer a full range of services to their customers. A state-owned bank, KfW, provides special credit services, including the financing of homeowner mortgages, guarantees to small and medium-sized businesses, financing for projects in disadvantaged regions in Germany and export financing for projects in developing countries.

The private bank sector is dominated by Deutsche Bank and Commerzbank, with a balance sheet total of EUR1.3 billion and EUR462 billion respectively (2018 figures). In efforts to raise capital ratios in advance of new international guidelines (the Basel III agreement), both banks continue to shrink the size of their balance sheets. Commerzbank received EUR18 billion in financial assistance from the federal government in 2009, which gave the government a 25% stake in the bank (now reduced to 15.6%). Merger talks between Deutsche Bank and Commerzbank, a deal that would have created Europe’s third-largest bank with €1.8 trillion (c. $2 trillion), failed in April 2019. Experts speculate the failure could open the door for a take-over attempt of Commerzbank by a rival foreign bank. Germany’s regional state-owned banks were among the hardest hit by the global financial crisis and continue to face major challenges to their business models. The federal government is currently in the process of winding down several so-called “bad banks” composed of toxic assets of failed banks WestLB (now Portigon AG) and Hypo Real Estate.

Most major U.S. banks are represented in the German market, principally but not exclusively in the city of Frankfurt am Main, Germany’s main financial center. A large number of German banks, including some of the partially state-owned regional banks, similarly maintain subsidiaries, branches and/or representative offices in the United States.

Practices regarding finance, availability of capital and schedules of payment are comparable to those that prevail in the United States. There are no restrictions or barriers on the movement of capital, foreign exchange earnings or dividends.

Foreign Exchange Controls

The German government imposes no forms of controls on the purchase or sale of foreign currencies.

US Banks & Local Correspondent Banks

Bank of America N.A.
Neue Mainzer Straße 52 60311 Frankfurt am Main, Germany
Phone: +49 69 589910

Citigroup Global Markets Germany
Reuterweg 16, 60323 Frankfurt am Main, Germany
Phone: +49-69-1366 0

JP Morgan AG
TaunusTurm, Taunustor 1, 60310 Frankfurt am Main, Germany
Phone: +49.69.7124.1601

Goldman Sachs
Friedrich-Ebert-Anlage 49, 60308 Frankfurt am Main, Germany
Phone: +49-69-7532 1000

Merrill Lynch International
Main Tower, Neue Mainzer Strasse 52, 60311 Frankfurt am Main, Germany
Phone: +49-69-5899 5000

Morgan Stanley
Junghofstr. 13-15, 60311 Frankfurt am Main, Germany
Phone: +49-69-2166-0

Project Financing

Germany possesses the financial framework and institutions to support the development of large infrastructure projects. However, the volume of project finance operations has been relatively modest in Germany in comparison to other EU countries, particularly the U.K. and France. Although the relatively high debt levels of the German federal government and local authorities would seem to favor this type of financing, difficult economic conditions have also limited anticipated rates of return for potential project finance developers. Other inhibiting factors are Germany’s complex juridical and federal frameworks, which make project-financed works harder to structure than in other countries. Low interest rates and returns on savings have contributed to an improved investment climate. One area that has attracted project finance, including that involving a few U.S. developers and investors, is alternative energy production. Clean and renewable energy projects have gained prominence in Germany, particularly since the decision in 2011 to accelerate the phase-out of nuclear energy by 2022. Measures to phase out coal-fired generation, currently under consideration, would further boost demand for alternative energy projects.

The principal German institutions active in facilitating project finance deals are the state-owned KfW Bank Group (which plays a major role in most industries), commercial banks such as the Commerzbank, and several of the publicly-owned savings banks controlled by state and local governments (Landesbanken) located in northern Germany. The KfW Group includes KfW IPEX-Bank, which supports a consortia with German members to design and finance infrastructure projects in Germany and overseas. Another group member, KfW Development Bank (Förderbank), helps municipalities to finance infrastructure. German insurers are pressing for regulatory changes to enable them to finance infrastructure projects.

Financing Web Resources

Trade Finance Guide: A Quick Reference for U.S. Exporters, published by the International Trade Administration’s Industry & Analysis team

Export-Import Bank of the United States

Country Limitation Schedule


Trade and Development Agency

SBA's Office of International Trade

USDA Commodity Credit Corporation

U.S. Agency for International Development

European Bank for Reconstruction and Development (EBRD) 

U.S. Commercial Service Liaison Office to the EBRD 

KfW Bank Group 

The German Bankers’ Association 

Federal Financial Supervisory Authority 

CCG Trade & Project Financing

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