For many companies, short-term financing solutions are great tools for paying bills, managing, operating and developing their business. Taken care of by traditional banking establishments or specialized lending companies, credits and loans of short durations have specific terms of repayment. How to make the best use of short-term financing, especially when your company is part of a digital market?
Financing short-term needs: the classic solutions
Companies often need to finance their cash flow in order to cover their working capital needs (the accounting gap that may exist between the payment of invoices and the payment for suppliers). These financing arrangements are called cash flow credits and require proof of very good management of the customers' activity to be obtained. These credits consist of debts contracted with the credit institution. There are several of them: factoring, cash credit, overdraft, Dailly assignment, etc.
The overdraft facility authorizes the company to be in debt for a few days (15 days per month maximum). It is a solution that allows to finance urgent cash needs that can occur at specific periods, such as the payment of salaries or social contributions. The overdraft facility is not subject to a written contract - it is usually a verbal agreement between the bank and its customers. Although very flexible, the overdraft facility has a significant cost to the business due to its high interest rates.
Companies can also use the financing method of factoring, which consists of selling their unpaid invoices to a specialized structure or to a bank. This transfer of receivables is done in exchange for a cash advance to the customers corresponding to the amount of the invoices. The Dailly assignment, however, consists of an advance corresponding to the amount of the customer's receivables.
Contrary to factoring, the bank overdraft allows a company account to be in debt for several days, or even several weeks. It is established by a written contract between a bank and its customer, which determines the amount, the period of overdraft, as well as the monthly repayments. This form of financing is used when a professional structure needs cash immediately and knows that a corresponding cash inflow will be made within a definitive short time.
The campaign loan is set up for companies with seasonal activity. It allows the bank to cover the expenses and financing needs that correspond to the restart of the company's activity. Therefore this solution constitutes a risk, since the banks cannot know in advance if the season will be successful or not. In order to finance its short-term needs through campaign credit, the company must therefore demonstrate scrupulous management and very stable financial liabilities.
Revenue-based financing: a new short-term financing solution?
The revenue based financing method is based on the analysis by software specialized in the strategic metrics of the potential turnover of a structure. It is a system that allows not only digital start-ups but also a wide variety of traditional SMBs to obtain very advantageous loans in a short timeframe, and thus to finance their cash flow needs in the short term.
Silvr's teams evaluate their clients' requests for financial loans, and if the companies are eligible, make the funds available to them within 48 hours. While interest rates can be high, the method allows companies to obtain short-term cash flow financing to launch their business, to meet one-time needs or to meet cash flow requirements. Our credit solutions can also be granted from the creation of the structure, in order to support its development projects.
Moreover, Silvr's loans can be repaid in the very short term with no punishing fees. The businesses that receive a loan are able to set and manage their monthly repayments at their own discretion. In case of a revenue-based financing agreement, the company is only required to make payments in the months in which it has actually received a turnover.
