There are various reasons why companies are unprofitable. As each situation is very different, it must be dealt with on a case-by-case basis.

Important questions to create a satisfactory overview:

• When was the company founded?
• Are there reasonable explanations for the losses?
• What does the profit forecast look like?
• Are there any concrete plans or projects to increase profitability?
• Are business forecasts from a third party available?

It is favourable if the following exist:

• Reasonable explanations for losses in certain years
• Concrete plans to improve the business and increase profits, e.g. renovation, purchase of new machinery and equipment, restructuring
• Realistic business forecast for the next several years, showing increasing profits (preferably confirmed by a third party)
• Reasonable purpose of cover (e.g., investment or loan agreement)

Special situation with start-ups:

If a company has just been founded, it is normal that there are no business figures available and that losses arise due to initial set-up costs. In most cases, the initial projects are supported by private investors. Often, they would like to have security for their investment. When underwriting start-ups, one should try to assess whether the industry has a promising future and what plans, or projects exist for the future. In all cases, the amount of the loan/investment should match that of the requested cover.