As startups’ turnover grows, day-to-day cash (known as working capital) financing needs may arise. Bridging the gap between payments and collections in an environment of growing turnover can become a must.

For example, in B2B models, it may happen that collections from clients are not immediate; sometimes the client will pay you at a future date, thus creating a tension in the liquidity in your startup.  In some cases, paying suppliers can also become a challenge, when the volume of orders is increasing and our suppliers ask us to pay in cash, as well as the responsibility of meeting usual payments such as wages and salaries or taxes.

It is important to know the banking instruments at your disposal to use the one that best fits the needs of your startup.

One of the best-known solutions is the credit facility, but there are other much more specific products and sometimes they are more efficient, such as:

• Reverse Factoring A banking service for managing payments to suppliers. This solution allows you to make payments to suppliers digitally and also to finance them. Reverse factoring simplifies the management and administrative processes of payments to suppliers, and improves positioning with regard to suppliers because it offers them a form of financing without recourse
• Factoring A financial tool that enables you to finance your companies working capital by advancing collections from your clients in this country and abroad. This is a global solution, which allows not only for the administration and advance payment of invoices, but also covers against the possible insolvency of your clients.
• International Commercial Financing Allows you to finance both payments to international suppliers and to advance collections from foreign clients, in euros or in other currencies. This allows you to adjust the financing term to the needs of your startup.
• Credit facility This is a global solution to deal with day-to-day payments and cope with peaks in managing cash in your business; for example, in cases when it is complicated to juggle collections from clients and recurring payments at particular times. It is important to bear in mind that this has pre-set maturity.

The use of one or several financial solutions to support your cash management will help you grow quickly and efficiently, overcoming the limitations that a cash shortage entails.

Contact the BStartup branch (Branches – BStartup Banco Sabadell – bancsabadell.com) and we will advise you on these and other solutions for your startup.

Enric Chiva
Commercial Director BStartup