Sources of Financing
Next we need to look at your sources of financing.
Currently the most obvious sources of cash are subsidies that your government may provide to you because of the crisis. You will already be aware of what is available in your country and city.
But there is much more to it. Let's dive in:
YOUR SUPPLIERS
A less obvious source of financing is the procurement cycle.
- How much cash do you have stuck in inventory, and in customer receivables? Is there a chance to reduce delivery times? This will reduce the cash that you have stuck in inventory.
- Can you demand quicker delivery from your customers?
- Or can you ask your customers to pay earlier to generate cash out of your receivables?
- Can you pay later to your suppliers to generate cash out of your payables?
Who says finance isn't creative. See if you can come up with new solutions.
WORKING CAPITAL FINANCING
Another source of financing is support from the banks to finance your procurement cycle.
- Can you get working capital financing? Working capital financing comes at attractive terms because you have physical assets, your inventory, to offer as a collateral for the bank.
LOANS
The last step is a renegotiation with the banks to get bridge financing or long-term debt. Why is it the last step? Because banks don’t like problems, they like solutions. They want to be guided. Once you enter negotiations you should have a clear roadmap in place. You should understand what measures you can do on your behalf to enhance the situation. You should also understand the risk structure of your business and what security you can provide. Show them that you are in control and they are much more likely to stand by you when you need them.