Participatory loan and short-term financing

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Loan: what duration of financing?

The duration of the financing must always adapt to the needs of the company. Thus, for example, for durable goods used over a long period such as a production line, or construction machinery, long-term financing is the most appropriate choice. On the other hand, cash flow requirements or the purchase of short-lived equipment will rather be financed by short-term loans. The importance of adapting the maturity of a financing to the type of asset is quite simply paramount. Because this is how you will be able to preserve the financial balance and equity of your business.

Choose short-term financing

On a daily basis, the company must buy supplies, goods or even raw materials. To do this, it needs cash. However, the sometimes significant gaps between disbursements and receipts can put the company in difficulty.
This is why putting in place short-term financing can be crucial. The latter make it possible to improve day-to-day commercial efficiency and avoid recourse to self-financing , which tends to weaken companies.

Negotiate a short-term loan with your bank

In certain specific situations, such as a significant delay due to a one-off increase in activity, short-term loans are the ideal solution for entrepreneurs. In particular, the latter can negotiate a campaign loan with their bank. They make it possible to cover the money needs necessary for the manufacture and storage of products, before their mass sale in a short period of time.
With this financing solution, the bank grants a line of credit, the use of which is generally made through the issuance and discount of financial notes, as needed.
Another possible option for entrepreneurs, negotiating with their banker an overdraft authorization, cash advances or overdraft facilities, which can be envisaged over a very short period.

Mobilization of trade receivables

Finding funds is also possible thanks to the mobilization of trade receivables. Enough to finance the needs of the business in the short term. To do this, you can go through:

• Factoring : it is an operation by which a specialized establishment (the factor) takes charge of all or part of the recovery of the accounts receivable of a company, against remuneration. In practice, the factor grants a cash advance to the company and collects trade receivables. In return, the company pays commissions to the factor. Practical, this solution is however expensive because it takes care of the risk of non-payment.

• Discount : Here, the company cedes negotiable instruments to the bank. Thus, it immediately obtains the relative cash, without waiting for the due dates. However, this solution is only conceivable if customers pay by commercial paper. In addition, the bank reserves the right to refuse the discount of certain customers considered too “at risk”.

• Daily financing . This alternative, which is very similar to the commercial discount, allows all existing means of payment to be transferred to the bank, as soon as invoices are issued.