Banks or credit institutions offer many short-term credit specific to businesses: bank loan, overdraft, cash facility or discount, factoring, Dailly transfer, etc. The offers and the conditions of granting vary according to the banks. A review of the different financial options available to small businesses.

Cash: the different credit options

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If you are a CEO of a small business, you are not necessarily an expert in financing. And you rarely have resources internally to arbitrate knowingly between the different financial options available to you. They are mainly six in number:

Overdraft

The authorized overdraft is a line of credit which allows to have a receivable up to a maximum amount granted by the bank.

This solution is particularly suitable for certain long operating cycles and certain activities generating more recurring cash requirements.

Overdraft facility

The cash facility makes it possible to have a debit account temporarily, without exceeding a few days in the month.

This solution makes it possible to manage with flexibility, its immediate expenses (fixed charges for example) and deferred encashment (payment of a customer with a delay of payment for example).

Short term credits

Short-term loans are loans that respond to specific situations generating significant cash offsets (linked to a one-time increase in activity, financing an asset) or longer (due to an operating cycle). atypical, seasonal or international …).

Dailly disposals

The Dailly mobilization is the assignment or the pledge of certain trade receivables (invoices issued on one or more customers) to the bank via a slip.

The bank grants a credit in return for these invoices, for example in the form of a credit line to a dedicated dedicated account, or an authorized overdraft secured by the receivables.

Discount

The discount is used to obtain payment by the bank of a bill of exchange (bill of exchange, promissory note) before its due date, within the limits of a ceiling (discount line) authorized by the bank and subject to its acceptance of the effect.

The bank is reimbursed by the payment of the bill, when due, by the client. We speak of “shooter” for the issuer of the effect (supplier) on one of his clients (the debtor, also called the “drawee”).

Factoring

Factoring is based on the purchase of trade receivables, provided by specialized credit institutions or finance companies that may be subsidiaries of banks. It offers a range of flexible services, allowing companies whose customers are other companies or public bodies:

  • to benefit from a financing of their cash needs (alternative or complementary to the traditional bank credit, proportional to the activity of the company);
  • to outsource the management of their receivables (regulation management, recovery …),
  • to cover the risk of unpaid

Estimate the effective cost of cash financing products

Amortization table and overall effective rate (APR) for loans

For a short-term or medium-term fixed rate credit, you can easily evaluate its cost from a depreciation schedule and the overall effective rate (APR).

Chartered accountant or approved management center for other treasury tools

For the other treasury tools (cash facility, overdraft, discount, Dailly transfer and factoring), the actual cost is more difficult to define due to the lack of harmonization of terminologies between banks and the variety of Tariff components, often related to the intensity of use of funding.

Therefore, it is recommended to carry out financial statements in connection with the certified accountant or the approved management center of the company, or with the financial institution. In advance, you can ask the bank or the credit institution:

  • an interview to take stock of the short-term financing products used,
  • an annual, synthetic, clear and comprehensive bank summary of costs.