Optimize your cash flow with a business cash loan

Obtaining a business cash flow loan can be an essential lever for growth and financial stability. It helps to optimize cash flow by providing immediate liquidity to meet operational needs, the latter being representative of the company's ability to meet its expenses and any unforeseen events.

In this article, find out how to optimize your financial flows.

What exactly is a cash-flow loan?

A cash loan is a type of short-term credit granted by a bank or credit institution to enable a company to cover occasional or recurrent cash requirements . This is an unrestricted advance of funds to cover unforeseen expenses or to carry out a project. It is granted via a signed or verbal contract, and allows the company to have a debit account for a certain period of time.

In other words, the cash loan is a form of financing designed to provide a company with immediate liquidity. It is designed to meet urgent working capital requirements, such as :

• Payment of wages

• Suppliers

• Financing specific projects

This optimizes cash management and keeps business operations running smoothly.

Credit institutions generally do not require no warranty to grant a cash-flow loan. However, you must demonstrate sound management of company accounts .

Cash loans can take a variety of forms, including overdraft facilities, bank overdrafts, campaign loans and cash advances. Interest rates and loan terms vary according to offer and borrower profile.

Why take out a cash-flow loan?

First of all, a healthy cash flow is the lifeblood of any small business! Without it, the company cannot evolve. By definition, cash flow refers to the liquid assets available in a company's coffers or bank accounts. When a customer defaults or there's a downturn in business, cash may be insufficient to keep the business running. Asking for a cash advance then becomes a necessity enabling the company to increase its equity capital.

Every business has costs to meet to ensure its viability. Here are the different scenarios that can lead a company to turn to a cash flow loan:

• A cash flow gap . In other words, it's when there's a gap between expenditure and revenue.

• A decline in sales business

• A unexpected expense (replacing broken-down equipment, for example)

• Un late payment from a customer

• Un need for development one-off

What's more, a cash flow loan offers a number of advantages:

• Cover short-term financing needs. The loan thus becomes the company's cash flow.

• Boost your business growth at your convenience.

• You decide the rate of repayment and in the event of unforeseen business success, you also have control over the terms of early repayment.

• Interest on cash credit is tax-deductible.

• You choose the ideal repayment term 3, 6, 12 or 24 months, etc. You can negotiate the terms of the contract, guaranteeing a loan tailored to your business and the size of your company.

Different types of loans

Here are the different types of loans you can apply for from your bank to finance your cash flow needs.

Overdraft facility

The overdraft facility is a limited account debit authorization, authorized by the bank from time to time. It can be used to cover exceptional shortfalls between expenditure and income, for example while waiting for a salary to be paid.

Overdraft facilities are generally granted for 15 days per month, beyond which the account must return to credit. Overdraft facilities entail the payment of interest, known as agios, which are calculated according to the amount and duration of the debit. However, the amount can be negotiated with the bank to limit costs for the company.

Campaign credit (or cash advance)

A campaign loan is a short-term loan which to finance seasonal business needs . It is designed for companies with a long operating cycle, such as agriculture, agri-food or tourism. allows the company to have a debit balance overdraft on your account up to a limit and for a period set by the bank. The duration of the overdraft may be long. The bank therefore takes a higher risk. To qualify, you need to have stable financial liabilities.

Campaign credit is not earmarked for a specific purpose . It can be used to finance :

• Supplies

• Manufacturing

• The transformation

• Storage of goods

The campaign credit generates interest, which is generally lower than that of a conventional overdraft.

Bank overdraft

A bank overdraft is a situation in which sums withdrawn from an account exceed the available balance . The bank overdraft may or may not be authorized by the bank. It is the subject of a contract signed with the bank. If authorized, the bank sets an overdraft limit and duration, which are specified in the account agreement .

Like overdraft facilities, authorized overdrafts entail payment of agios, which are calculated according to the amount and duration of the debit. On the other hand, these are less expensive than for a payment facility, and can also be negotiated.

Unauthorized bank overdrafts expose the company or individual to fees and penalties, which are capped by law. Unauthorized overdrafts can also affect the customer's bank rating and creditworthiness .

The different credits and associated rules

There are several categories of credit, each subject to specific rules:

Debt securitization loans

Trade receivables financing (CMCC): this is a technique that consists of assign trade receivables not represented by a bill of exchange to a bank, which guarantees payment on maturity . There are several types of receivables financing, depending on the method and conditions of assignment:

• Factoring Factoring: this technique involves entrusting the management of trade receivables to a specialized institution, known as a factor, which is responsible for collecting the receivables and insuring against the risk of non-payment.

• Dailly assignment: This technique involves assigning one or more receivables to a bank on the basis of a slip containing full details of the receivables concerned.

• Bank discounting Bill of exchange: a technique whereby a commercial paper (bill of exchange, promissory bill) is transferred to a bank, which guarantees payment on the due date.

Inter-company credit

Le intercompany credit is a form of short-term financing that enables companies to grant each other loans or payment terms within the framework of their commercial relations. It results from contractual payment terms agreed between companies, and is a component of working capital requirements.

Inter-company loans are subject to certain conditions, in particular

• Companies must have economic ties

• The borrowing company must be a microenterprise, VSE, SME or ETI

• The lending company must be a SA, SAS or SARL with accounts certified by a statutory auditor

• The loan must be formalized in a written contract

• The loan amount must be mentioned in the annual management report and be certified

• The maximum loan period is 2 ans

• Net cash must be positive

Leasing

Leasing is a form of financing that allows a company or professional to lease an asset (movable or immovable) from a financial institution (the lessor), which retains ownership of the asset.

The leasing rules are as follows

• Leasing can cover movable assets (equipment, vehicles, etc.) or real estate (premises, land, etc.)

• Leasing is subject to ordinary contract law and the specific provisions of the Monetary and Financial Code and the Commercial Code

• Leasing must be formalized in a written contract which specifies the characteristics of the property, the rental period, the amount of rent, etc.

• The lessor retains ownership of the property until the lessee exercises the purchase option

• The lessee has enjoyment of the property and bears the risks. He must pay rent and respect contractual obligations

• The lessee may exercise the purchase option at any time or at the end of the contract, in accordance with the terms of the contract

How can I get a loan?

To obtain a loan, follow these steps:

• Identify cash requirements the amount, duration and purpose of the loan, as well as the company's repayment capacity.

• Choose the right type of loan : compare offers from different financial institutions and choose the one that best suits your company's needs

• Preparing the application file You need to assemble all the necessary supporting documents, such as balance sheets, financial forecasts, financing plans, etc.

• Negotiating loan terms You need to discuss the terms and conditions of the loan with the lender, such as interest rate, fees, collateral, maturity dates, etc.

• Sign the contract and receive the funds: once the contract has been signed, the company receives the funds in its bank account and can use them to finance its cash flow requirements

What's the alternative to a business loan?

Are you looking for an alternative to a bank loan to finance a short-term cash requirement? Adopt Hero as a payment solution. This a flexible, practical solution specifically designed to meet the needs of very small businesses. in B2B transactions.

Hero is a solution that offers payment facilities for the purchase of goods and services. Order now and pay in instalments of 3 or 4, or defer payment after 30 or 60 days. The solution offers deferred payment and instalments. Your commercial relations with your suppliers won't suffer either, as the platform pays their invoices immediately.

In the same way, you don't risk the repercussions of late payment, because you'll be paid for each and every one of your sales, the platform also advances you the amounts of your invoices.

Using Hero as a payment solution allows you to meet your occasional working capital requirements.

In conclusion, optimizing a company's cash flow is essential to its stability and expansion, and a well-managed cash loan can be a powerful tool in this process. It offers the financial flexibility needed to seize opportunities and overcome challenges. The right choice of business cash flow loan can be the key to financial success.

Other articles on the same subject:

• Small business financing: how to finance your small business?

• Reverse factoring: what is it?

• Revenue based financing: what exactly is it?

• How to finance and optimize working capital requirements?

• Alternative financing: everything you need to know from A to Z