Treasury: what alternatives to bank financing?
Cash flow isn’t just a CFO issue: it’s the keystone of your ability to invest, pay, and grow. And when a company faces increasingly rigid bank financing conditions—high interest rates, collateral requirements, and tight lending criteria—it becomes vital for a company to understand and master alternative financing solutions to secure its operations, preserve its cash flow, and finance its growth.
From factoring to crowdlending, including inter-company credit and outsourced debt collection , let’s take a pragmatic look at these alternative solutions.
Why is cash flow crucial for businesses?
Cash flow is the fuel of a business. Without it, it’s impossible to pay expenses, suppliers, or invest. Cash flow reflects the ability to meet deadlines and absorb unforeseen events. A banker who refuses financing then presents the company with a major challenge: how to maintain or strengthen its cash flow without going through traditional banking channels?
Treasury: first optimize its management
Before seeking alternative financing, optimizing cash flow management remains the safest and fastest way to limit cash requirements. Properly managed cash flow helps avoid unnecessary stress and improve overall profitability. Here are the best practices to adopt.
Accelerate customer collections: don’t underestimate the recovery lever
Indeed, customer payment delays are often the primary cause of cash flow pressures in businesses. However, every day of delay represents an invisible cost: a lack of liquidity to finance current expenses, recourse to short-term financing, and even the risk of defaulting on payments. Therefore, to avoid this domino effect, professionalizing debt collection is a strategic necessity.
- Implement a clear credit policy
- Systematically assess the solvency of your prospects before signing a contract: a customer who does not pay, even with a good contract, remains a net loss.
- Set payment terms tailored to each customer profile, taking into account their financial strength.
- Clearly specify payment terms and late payment penalties in your general terms and conditions of sale .
- Structure the recovery and recovery process
- Automate preventive reminders from 5 days before the deadline: a courteous reminder before the deadline is sometimes enough to trigger payment.
- Plan successive and graduated reminders: friendly reminder by telephone or email, formal notice, then recourse to external recovery if necessary.
- Formalize a clear internal process: who follows up, when, with what message, and when do we call on an external service provider.
- Outsource amicable recovery to maximize the chances of success
- Automate preventive reminders from 5 days before the deadline: a courteous reminder before the deadline is sometimes enough to trigger payment.
- Plan successive and graduated reminders: friendly reminder by telephone or email, formal notice, then recourse to external recovery if necessary.
- Formalize a clear internal process: who follows up, when, with what message, and when do we call on an external service provider.
But, despite all internal precautions, some customers delay or refuse to pay. Calling on a debt collection expert like GESTION CREDIT EXPERT allows you to:
- To optimize your recovery rate quickly thanks to proven techniques and in-depth legal know-how.
- To preserve the commercial relationship: a third-party expert knows how to combine firmness and diplomacy, preventing recovery from damaging the customer relationship.
- To focus on your core business while the expert recovers the amounts owed.
- Improve your DSO (Days Sales Outstanding), a key performance indicator that measures the average customer payment time.
Go as far as legal recovery if necessary
When the amicable phase fails, it is possible to:
- Initiate appropriate legal proceedings: payment order , interim relief, payment summons, etc.
- Maximize the chances of recovery by relying on partners who understand the legal mysteries and can quickly initiate the necessary actions.
To remember:
In reality, debt collection isn’t just a topic to address in the event of a cash flow crisis: it’s a real tool for preventing unpaid debts and optimizing collections. A well-structured recovery process, coupled with the expertise of a debt collection professional, allows you to quickly convert your receivables into cash, while securing your cash flow over the long term.
Optimize supplier disbursements
Finding the right balance between meeting supplier deadlines and cash flow management is essential:
- Avoid paying in advance without commercial compensation.
- Implement staggered payment or supplier financing solutions, which help preserve cash flow without harming the business relationship.
- Negotiate longer payment terms, especially with trusted partners.
Carefully manage your working capital requirements (WCR)
Reducing the WCR allows you to free up cash without external financing:
- Control your inventory: Too much stock ties up cash unnecessarily. Optimize quantities and rotations.
- Reduce customer lead times and extend supplier lead times to adjust flows.
- Anticipate periods of cash flow tension by building monthly or weekly forecasts.
Automate and digitalize financial management
Digitalization allows for more precise and responsive monitoring of cash flow:
- Use cash flow forecasting and cash inflow/outflow tracking tools.
- Integrate Credit Management solutions to anticipate customer risks and secure sales.
Secure flows with credit insurance
Credit insurance helps protect cash flow against non-payment by guaranteeing a portion of trade receivables:
- This limits financial losses and secures collections.
- It is also a guarantee of seriousness with banking or financial partners.
Train teams in cash culture
Cash flow is not just a matter for the CFO or Credit Manager:
- Educate sales teams about the importance of payment terms.
- Train them to detect weak credit signals in customers.
- Involve all stakeholders in cash culture.
👉 On this subject, discover our customer account outsourcing offer to effectively strengthen your cash flow.
Banking alternatives to finance your cash flow
Crowdlending: participatory financing for cash flow
Crowdlending allows businesses to borrow directly from individuals through online platforms like October or Lendopolis. This alternative to bank loans is appealing for its simplicity and speed.
Benefits :
• Simplified access to financing without personal guarantee
• Diversification of cash sources
• Short response times
Disadvantages:
• Higher interest rates than banks
• Strict eligibility conditions
This solution may be suitable for companies needing to strengthen their cash flow over a short or medium term.
Intercompany credit: solidarity in the service of cash flow
Less well-known, inter-company credit involves obtaining extended payment terms from suppliers or offering more flexible payment terms to customers.
Strengths:
• Strengthens cash flow without financial costs
• Develops a relationship of trust with partners and clients
Boundaries :
• Not always negotiable, especially with large companies
• Risk of imbalance if the commercial relationship becomes strained
Leaseback: valuing assets to generate cash flow
Leaseback or sale-leaseback allows you to sell an asset (machine, building) to a leasing company, while continuing to use it through a rental contract.
Benefits :
• Rapid cash generation
• Conservation of the use of the asset
Disadvantages:
• Overall cost higher than owning it
• Process sometimes takes a long time to implement
Financing through the market or investment funds
Some companies may tap investment funds or raise capital on private markets. This remains reserved for larger or innovative companies.
Benefits:
• Massive cash injection
• Access to strategic support
Risks:
• Dilution of capital
• Investor pressure on performance
Factoring: transforming your invoices into immediate cash flow
Factoring involves transferring customer receivables to a specialized company (the factor). The company advances the funds for a fee. This cash flow financing solution is fast and particularly suited to growing businesses or those with delayed payments.
Benefits :
• Immediate liquidity to strengthen cash flow
• Outsourcing of customer risk in the case of “non-recourse” factoring
• Administrative relief thanks to the management of reminders
However, before resorting to this solution, it is essential to carefully measure the impacts, both on costs and on customer relationship management.
Boundaries :
• Often very high cost for SMEs
• Process sometimes restrictive depending on the factors
In summary, factoring can effectively meet a one-off cash flow need, but its use must remain reasonable. It is less suited to companies that wish to maintain direct control over their receivables and maintain controlled margins. For them, tailor-made outsourced debt collection is a sensible alternative: it allows them to act precisely on overdue receivables without transferring either the invoices or the management of the commercial relationship, while securing cash flow over the long term.
How to choose the right solution for your cash flow?
The choice of a cash flow financing solution depends on:
- On the urgency of need
- On the financial strength of the company
- The ability to mobilize assets or receivables
- The cost the company is willing to bear
- It’s often a good idea to combine several solutions to secure your cash flow over the long term. It’s also an opportunity to overhaul your financial management processes.
👉 Here is a comparative table of solutions to choose the one that really corresponds to your context
In conclusion, cash flow is a strategic pillar to be monitored closely.
When the bank says no, the company must be able to react quickly to protect its cash flow. Diversifying its financing sources, better managing its working capital needs, or even outsourcing debt collection are all avenues to explore to secure its financial future.