The Financing is key for companies and the self-employed in all its vital stages. Whether it is to start your activity, boost your growth, help with your internationalization or manage daily payments, having the necessary liquidity makes the difference. There are multiple options depending on needs of each business, with short, medium and long term financing.
Below you will find information about different types of financing to boost your business, and we also invite you to view our webinars about the Future challenges in financing.
Future challenges in financing
Short-term business financing
This type of financing helps companies and the self-employed to address immediate liquidity needscover operating expenses and manage cash gaps. The most common are:
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Commercial discount. This is a type of financing for companies that allows anticipate the collection of your sales before the expiration date agreed with its clients occurs. This product is especially useful for improve short-term liquiditysince the company obtains the amount of its collection rights without having to wait for the agreed payment period. There are several ways to implement this type of financing:
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Commercial effects: such as bills, promissory notes or direct debit receipts. They are documents issued by the debtor that the company delivers to the bank to obtain advance financing. The entity can also be in charge of managing collections at maturity.
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SEPA direct debits: In this case, the bank advances the amount to the company before maturity and, at that time, sends a debit order to the debtor’s bank to collect.
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Invoices, certifications and international replacements: The bank finances the company by presenting these documents, although without taking charge of the collection management. It is a common option in international operations.
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Factoring: It consists of the transfer to the bank, by the company, of the outstanding credits of its clients, so as to improve its liquidity. In addition to financing, the company can request coverage against the possible insolvency of its debtors, when contracting the modality of factoring without recourse or with coverageand hand over the management of invoice collection to the bank, thus reducing its administrative management costs. For example, a business that issues invoices within 60 days can use factoring to obtain the money immediately, adding insolvency coverage for its debtors and the collection management of those credits.
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Confirming: supplier payment management service that includes three modalities:
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He confirming standardwhich allows a company to send payment orders for future invoices to its suppliers, with the bank offering these suppliers the possibility of collecting said invoices in advance by deducting interest and commissions from the total payment. All without recoursethat is, the bank assumes the risk of non-payment by the payer.
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He confirming prompt paymentwhich allows the company to finance the cash payments it makes to its suppliers for a certain period.
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He confirming pluswhich works like the confirming standard, but adding the possibility for the payer to finance the payment made at maturity in an additional period.
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Payment line. This is a credit limit for companies, self-employed workers and businesses 100% digital and self-service whose provisions are amortized like a loan and serve to finance the most common payments. The provisions charge a fixed adhesion commission to the account depending on the payment being financed. The amounts drawn down and amortized become available again from the credit and have a maximum term of up to five years.
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Short-term loans. They are loans with installments adapted to the client’s needs, with a repayment period of less than 12 months, with the aim of covering specific needs.
Long-term business financing
Long-term financing is essential for companies and self-employed workers seeking expand, invest in infrastructure or develop large-scale projects, which allows them financial planning to obtain the necessary capital, or to avoid becoming decapitalized. Choose between the best financial option It depends on factors such as payment capacity, investment purpose and business model.
Unlike short-term financing, these solutions offer longer repayment terms, allowing for better financial planning. The most common are:
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Long-term loans: The company receives an agreed amount that must be returned in the form of periodic installments and with an established amortization schedule. For example, a manufacturing company needs to acquire new machinery to boost its production and requests a 10-year loan with fixed installments to finance the purchase without compromising its liquidity. At this point there are also mortgage loans for companieswhich facilitate financing with a real estate guarantee and a longer-term repayment time for different purposes (construction of warehouses, offices…).
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Leasing: option to have assets such as vehicles, machinery or technological equipment without the need to make a large initial investment and which is formalized through a rental contract with the option to purchase. It can offer tax benefits1 such as the deduction of contributions paid and the possibility of accelerated depreciation of the asset.
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Public and institutional financing: The administration offers financing lines with favorable conditions for business promotion. Among the most notable are the ICO Lines.
Other financing options for companies
Sustainable financing
Those companies that invest in projects with sustainable purposes and environmental improvement can benefit from reduced conditions in financing operations. For example, there is funding to drive improvements in energy efficiency of a company (construction and rehabilitation, lighting, efficient machinery, industrial decarbonization…) or for the implementation of renewable energy solutions (photovoltaic energy, solar energy, hydroelectric energy or green hydrogen). In addition, if a company needs commercial vehicles or transportation of goods and people that are sustainable, it is possible that, through the bank, it can also access financing for the implementation of zero emissions technologies.
International financing
Companies that carry out their activities abroad or that are thinking about expanding beyond national borders have different international financing options. In this way, it is possible that these companies have solutions for financing and discounting your sales abroadas well as for finance your import payments.
Other alternative solutions to financing
He renting offers you the possibility of enjoying assets for the development of your business activity, such as vehicles, technological equipment or various machinery, without having to make an initial investment, through a rental contract. Your company will pay a monthly fee for the use of the asset, which includes other services such as maintenance, software or insurance, for example, and with tax advantages1.
If you are interested in learning more about financing, we recommend the webinars about the Future challenges in financingwhich is about how to anticipate challenges and make the best strategic decisions for your company. You have it available at Sabadell Hub Companywhere you will also find other content of interest to your company. Discover them.
1 The tax advantages will vary depending on the type of operation and characteristics of the company/self-employed person who formalizes the operation.