The day when the bank tells you no is like a day without the sun
Banks, insurance companies, acquisition companies and similar institutions are providers of financial services to companies. The question, however, is how much it benefits companies and how much financial industry. If the market works, then the right measure between the benefit and price of the service is appropriate. What banks, insurance companies and other workshop providers offer more and better, but we may not know yet, we will present at 18. PFS.
Who is funded by business
Companies fund their business primarily with capital, bank loans and suppliers. We also have hidden forms of financing that are not visible at first glance, but they are important for businesses, but fatally important for business companies, in and after investment, and those who are still looking for their space on the market.
Net working capital = stock + claims – obligations to suppliers
Business unnecessary assets need to be redeemed to improve the financial credit. Receivables are the most liquid non -monetary assets. If we sell them, get money, settle debts, reduce the balance sheet, secure a payment capacity and (u) hunt for the bank’s financial commitments.
When the supplier wants to pay him earlier than we can afford, but also offers a crochet (discount), we can include a supplier factor that assumes the fulfillment of our obligations. Business obligations are thus settled, and a positive impact on EBITDA is also favorable.
With factoring, we can achieve much more than by selling or redeeming claims. In addition to payment, we also provide financial credit or capital adequacy.
The working capital is debts and not capital
When we deduct business obligations (predominantly to suppliers) from inventories and receivables, we get net working capital. If the claims and stocks are larger than the obligations to the suppliers, we must borrow, unlike. Usually at the bank, we borrow a loan for (permanent) working assets or limit on the account.
What I do not waste, I do not have to earn or – if I do not need funds, you do not need to provide funding sources.
There are also companies that fund suppliers, claims and still remains, so that suppliers also finance their equipment, real estate … This is well called « grazing on foreign clover » in Slovenia. We have to ask ourselves what happens when such a company begins to decrease the business. Obligations to suppliers as a source of financing are reduced faster than stocks and claims. Experience from the banking crisis!
However, since working capital relations are usually constant, we also need a more appropriate source of financing. As the company is growing, working capital needs grow. Growth and investments behind them draw on the need for money. Profit, as a source of financing for a growth company, is negligible. Funds are growing faster than profit and funds are not the cost to reduce the tax base.
The day when the bank tells you no is like a day without the sun
The bank gives you an umbrella when the sun shines. In addition, the day you get an approved loan is the day when the problems are not resolved, then the care of maintaining the loan is just beginning. Care for liquidity is to take care of payment, which is a guarantee of a financial credit.
Debts are limited by the credit rating of the company, so it is necessary to control your own credit, especially in the planned business.
Do you imagine the bank’s answer when the director comes into it and needs credit because it intends to work less and worse than last year?
When we submit an investment study to the bank and expect the project financing, we have to ask ourselves whether we really envisaged all the increase in the company’s funds. We invest to work more and better. Therefore, as a result, there will also be more in stock and in claims. Who will pay that? Suppliers are not always available. And where are the borders at the banks?
Caring for capital adequacy
If we stick to the financial commitments that the banks write down in the loan agreement, we may not even know that we have agreed with them, we are on a safer path. The share of capital between funding sources, EBITDA, financial debts or the share of fixed costs are changing every day, as well as financial security or bank credit of the borrower. Therefore, it is crucial that we set financial security criteria ourselves, respect the agreements with the bank and be aware of the financial consequences of our decisions. It seems simple, but it’s not. Experience shows that the balance sheets are just the basis for calculating the credit rating, and the actual credit rating is seen in the ability to settle the obligation. In cooperation with the bank and other providers, we can provide loan capacity.
Insurance of tangible assets
With property insurance, we ensure liquidity in an alternative manner, as in the event of a damaging event, the agent disappears from useful use but is not redeemed. Therefore, I need an insurance company that will replace us with liquid assets and allow for further business. Although it is not harmful, the highest risk of weakening the financial credit rating of the company is largely covered.
The insurance of tangible assets provides me with a replacement with a new one in the event of a damage event. It may also cover the loss of income or cover the costs when providing replacement equipment or facility. It is also a good practice in handling a means usually conditioned by the insurance company, a tip on how to reduce the risk of the likelihood of a loss event.
Unspeated property and risks
The claims of claims ensures liquidity despite the buyer’s untapped. The secured claim is more liquid because it can be sold with less discount, because the factor does not risk non -payment. Thus, we can have cheaper financing. We keep the EBITDA and reduce indebtedness to the same EBITDA.
Balance is not finance, just like profit is not money.
With 20 percent of our customers, we create 80 percent of Editd, and spend 80 percent of our time with problem buyers, while we spend too little for good customers. But what if our good customers begin to deal with our good customers? All we have to do is evaluate whether we will deal with good or bad customers.
At the 18th business and financial fair, representatives of the financial industry will also be prominent. We will ask them where they can be even better and what they expect from us to make it cheaper for us. All of you who attend the fair can expect most of the responses to the working capital dilemmas.
