Interesting for the short term, these financing solutions have however a significant cost, and some constraints.
At the first signs of weakness, the first financing solution for small businesses may be bank credit.
At the first warning signs, the banker can grant you additional credit, or even overdraft facilities or the authorization of a larger overdraft. This solution lends itself to limited and/or occasional needs, for small amounts. The company must present a good management of its finances, and a good general health.
Increasingly limited and demanding in recent years, the granting of bank loans for the financing of SMEs in difficulty seems to be picking up again in 2015. The French Banking Federation estimates that in November 2015, the outstanding amount of loans mobilized to SMEs increased increased by 2% over one year, and concerns more than one million SMEs. In France, 74% of SMEs obtained cash loans in the 3 rd quarter of 2015 .
Adapted to BtoB SMEs, it is a short-term financing solution . The bank takes the customer invoice to its account by applying a commission to it. This is generally quite high, insofar as the regulatory constraints are minimal, and with the sale, the company no longer has responsibility for the invoice, in the event of non-payment. There are several types of factoring, among them: online factoring , one-time factoring .
Assignment of receivables
When the needs are more recurrent or the amounts are high, the bank can have recourse to the assignment of receivables: it buys back its receivables from the company, while taking a commission on the sum returned by the debtor client. If the latter fails, the company is jointly and severally liable: this is its big difference with factoring.
As a form of short-term professional credit, the discount is a means of obtaining cash quickly: the bank pays the company a cash advance, in exchange for the transfer of a bill of exchange, with a rate of interest and commission included in the contract.
Lease-back or sale-leaseback
In the short term, the lease-back makes it possible to free up cash quickly. The company can use an asset, for example a car, while transferring ownership to a third party in the form of rent. This limits large investments – capital and management – in material goods.
Securitization makes it possible to increase its liquidity over the short term , by selling its trade receivables to investors on the markets. Much decried during the subprime crisis , this arrangement is once again in the news.
State financing and aid solutions for small businesses
To overcome banking limitations, the State and local authorities offer aid schemes for SMEs, alternative credit systems at a lower cost… Public financing solutions for small businesses in difficulty are numerous, but specific and complex. . They are generally demanding in terms of conditions.
Public and collective subsidies and assistance
Local authorities, national and European organizations provide a range of subsidies to support start-ups and developing companies . They are numerous and complex, and the criteria vary from one subsidy to another: job creation is a systematic criterion, there is also the promotion of the short circuit, the grouping of companies… To know the specificities and the conditions of eligibility, the CCI – Chambers of Commerce and Industry – and CMA – Chamber of Trades and Crafts are preferred interlocutors.
The credit mediator, the DGFP and the URSSAF
More than a financing solution, the credit mediator, the General Directorate of Public Finances and the URSSAF are a help in the face of a cash flow deficit . It meets a long-term need.
The credit mediator is a recourse in case of difficulties with the bank: he can intervene with the banks, in the event of refusal, but also propose solutions adapted to the problem of the company. The General Directorate of Public Finance offers tailor- made debt settlement plans . The URSSAF and the tax collection organizations also play an advisory role, and offer assistance in spreading payment deadlines , or in remitting late payment surcharges.