Increasing need for liquidity and financing
Young and medium-sized companies in particular have an increasing need for liquidity and financing, which should be integrated into solid corporate financing. In this way, appropriate company growth can be ensured. At the same time, however, liquidity bottlenecks can be avoided. The right financing option for your own company always depends on complex factors. It is not only the amount of capital required that is decisive, but also the corporate strategy and the type of goods or projects to be financed. For this, alternative forms of financing in particular offer a good opportunity to finance optimal corporate growth in addition to classic bank loans.
One option of the alternative financing variant is the still underused option of financing your purchase of goods. Anyone who relies on financing for the purchase of goods (so-called finetrading) has the option, as a buyer, of selecting the goods and products required by coordinating the conditions with the supplier. The finetrading provider acts exclusively as an intermediary, that is, mediates between buyer and supplier. After this coordination, the provider then takes over the purchase of the goods and sells them accordingly, granting an extended supplier credit. This period can be up to 120 days. A correspondingly agreed deferral fee is due within the period.
Own claims are sold to a factor
Another way to protect a company’s liquidity is through factoring. Here, own claims are sold to a factor, which brings the company immediate liquidity. At the same time, the company has 100 percent protection against bad debts. Since the factoring also largely eliminates accounts receivable management, the bookkeeping within the company is also relieved. In factoring, a distinction must be made between real and spurious factoring. In real factoring, the factor assumes the risk of default (so-called del credere protection). In this case, the recipient of the goods or products must pay directly to the factor. Interested parties should therefore always pay attention to the right choice of provider, because in addition to the risk assessment, there are other differences in terms and procedures.
Another option for corporate financing is equity capital. Of course, this depends on the particular financing occasion, because this measure always represents a long-term corporate strategy. Depending on the type, various capital alternatives can be selected. This starts with private equity, venture capital, mezzanine capital and goes through profit participation certificates and profit participation rights through partial loans, subordinated loans, convertible bonds, silent participations and ends with corporate loans, asset backed security and project financing. It is important to always make sure that the right financing option is used. Specialists ensure optimal implementation support by defining a professional financing concept.
Young entrepreneurs in particular
In all cases, however, it is important that young entrepreneurs in particular decide on the right financing structure in good time. On the other hand, it is wrong to only consider alternatives when the bank itself is no longer able to finance it. Especially in the growth phase, it can be fatal for a company if a financing gap suddenly opens up. As a result, suppliers often fail to meet their targets, resulting in the loss of their own creditworthiness. Now neither banks nor suppliers, leasing companies or credit insurers can offer more help. For the company, this step means payment in advance, which affects liquidity and in the worst case leads to bankruptcy. Anyone who wants to optimally create their entrepreneurial financing requirements is therefore always required to declare their creditworthiness a top priority.