The cash credit is a solution regularly used by professionals to cope with the daily management of their business. It can be requested by companies to finance a project, to meet specific financial needs and to cover their short-term cash flow requirements. There are several types of them: what are they, how to obtain them and what are the other financing solutions for professionals?
The professional cash credit: definition
The cash flow credit is not a personal loan, it is reserved for professionals and consists of a short term financing intended to allow a company to be in debt over a defined period of time. These short term credits aim at filling the working capital needs of a company in exchange for a high rate of repayment.
There are various solutions corresponding to forms of cash credit adapted to the specific business, its needs and its sector of activity.
Overdraft facility
The overdraft facility is a one-off, time-limited arrangement. It is an excellent way of meeting working capital requirements when cash flow shortfalls are minimal. The overdraft facility gives a company about fifteen days per month to remain in debit. Generally, it follows a verbal agreement between the bank and its borrower and requires verification of the amount of the company's physical assets (its inventory, for example). During these two weeks, the bank accepts the negative balance of its client and lets the transactions take place. However, the overdraft facility is subject to high interest rates and fees, which is a significant cost to the borrower.
Bank overdraft authorization
The overdraft authorization is governed by law when it comes to the interest rate to be applied and the duration. This device allows you to be in debt for a short period of time (one year maximum) and the debt limit is determined by a contract between the banking establishment and its client according to its cash flow needs.
Campaign credit
The campaign credit is a cash flow credit that is intended for companies with seasonal activity. As such, they can benefit from an advance from their bank to restart their activity in the new season. The campaign credit offers few guarantees for the bank, which cannot know if the new season will be successful or not. It is therefore a short-term credit whose repayments are expensive for the company.
Dailly assignment
Unlike a personal loan, the Dailly assignment allows the company to hand over its receivables to its bank in exchange for an amount. This cash credit is limited to a one-year term and subjects the borrower to significant interest charges.
Discounting
Discounting is a form of cash credit that offers an advance on invoices that have not yet been paid by the company's customers. If they remain unpaid, the company will be penalized and will become indebted to its bank.
Where to turn for a cash credit?
The cash credit is a real management tool for companies. It is possible to obtain financing credits from various establishments:
- The factors - or, factoring companies. These businesses buy the invoices and pay the amount to the company as an advance.
- The traditional banks and their subsidiaries, with which one can also negotiate a traditional loan or a credit insurance.
- Specialized loan organizations. Silvr offers short-term financing solutions based on a method called revenue-based financing. Companies that benefit from one of our financing solutions also have access to our long-term support, which allows them to better understand how cash credit can be a management and development tool.
Once their file is validated, the applicants receive the loan funds within 48 hours and can quickly finance a project. Our customers can also adjust the amount and recurrence of their monthly repayments according to their monthly turnover.
