One of the main obstacles for small businesses is access to finance. In recent months, the macroeconomic context has aggravated this situation. The rise in the Euribor and the announcements of rate hikes, both by the ECB and the Fed, translate into a direct increase in the cost of financing.
The SME, due to circumstances inherent to its size, is one of the big loserssince it does not enjoy the negotiating strength of the large companies and either they do not get access to credit, or their access conditions do not allow them to sustain their competitiveness.
For this reason, at Trinios, as a Fintech platform for SMEs, we believe that it is necessary to know and explore alternative ways of financing for small and medium-sized companies. These are three alternatives to consider beyond bank financing.
Factoring: pure financial speed
Through this solution, companies can advance the collection of invoices issued on credit and obtain money instantly. In short, a quick and easy way to have immediate liquidity.
In the factoring, a financial institution offers the amount corresponding to the payment of an invoice regardless of whether or not its due date has arrived. An alternative to take into account in those situations in which a service has been provided or a product sold, but has not yet been charged for it.
In addition, in the case of choosing the non-recourse modality, the financial entity assumes the total risk of non-payment. This means that, in the event that the client does not finally pay the financial institution, it will not be able to claim the payment from the SME.
Invoice advances: the best shield against delinquency
A frequent cause of lack of liquidity is the non-payment of one or several clients. Faced with this reality, this solution emerges as a way to obtain financing in a short period of time. A great possibility to value mostly in those situations in which the payment will take place in the long term.
In the advance payment of invoices, the SME receives in advance the amount of a certain invoice that it cannot yet collect for work already carried out. In short, a highly effective way to obtain money instantly without waiting for expiration, improve the company’s liquidity and avoid debt.
Thanks to this solution, it is possible to dispense with having to claim payment of an invoice from a customer. All you have to do is contact a credit institution that will handle the collection of the bills in exchange for low interest.
Debtor credit insurance: the financial lifesaver
Although it is not a financing method to use, there is no doubt that this tool is a great option for those SMEs who want to sleep well. Especially at times when it is sensed that the clients in our portfolio are also experiencing liquidity problems.
Thus, debtor credit insurance provides a financial lifesaver to protect SMEs from uncollectible risks in any customer bill. In short, coverage against a potential default. Collection insurance when it seems that everything is lost.
As a differential point compared to traditional insurance, this innovative methodology allows SMEs to protect themselves against the possible non-payment of a specific client without having to insure their entire portfolio.
21st century finance
In a context of rising bank rates that will continue over time, many Spanish companies have decided to dispense with the traditional channels with which they can count on immediate capital. As an alternative, they have found in these new methods a solution to their financing problems.
Once they try them, the speed, flexibility or ease of contracting are some of the advantages that SMEs value and that make them finally opt for this type of financing both in the medium and long term.
