Interest rates are rising, bills are piling up, the amounts paid for certain living expenses have doubled. The situation looks familiar. Not so long ago, a little more than a decade ago, something very similar happened. Then as now – cash was king.

Liquidity problems become the main cause of business failure. With economic instability on the rise, due to the highest inflation rate in the last 20 years, small businesses need a new tool to weather whatever may come next.

What can happen?

A lot of articles have already been published on the topic of falling real purchasing power, rising inflation, concerns about jobs, rising costs, and the like. Companies must protect themselves from a number of potential problems.

You may already be experiencing or expecting:

• Supply problems, delays in deliveries from suppliers, reduction in the availability of their stocks (read: the stock will be available to those who offer cash at once or pay in advance, and for the rest...hmm?);
• Increase in rental costs;
• Higher costs of cooling/heating, storage;
• Changes in salaries;
• Lack of labour, especially in certain industries (some sectors are facing major challenges after the pandemic, and labour mobility is increasing).

All these challenges are related to the issue of financing.

How to protect yourself from the mentioned risks?

Lack of money, i.e., working capital, can put a small company in an unpleasant situation very quickly. It is no longer enough to be "ready for what is coming". Regardless of whether it is a small business, a medium-sized enterprise or a large company, everyone must be proactive. One must respond to potential disruptions in the cash flows.

If the mentioned challenges already affect your company, it is almost certain that your business partners are also facing the same situation. Companies that owe you money are probably already asking for longer payment terms or are already late paying your invoices. Suppliers ask for advance payments or warn you that they will not have the products in stock at all times to meet your needs. How to deal with all these happenings?

Without access to cash, growth is more difficult to achieve, and for some companies, survival on the market is questionable.

What can you do?

Although there is no one-size-fits-all answer to improving liquidity, factoring financing is certainly one of the most flexible and simple options and is ideal for situations such as the current one. We will also explain why.

You have sold goods but you cannot wait for the customer to pay. You need money because you want to import a new shipment of products from your supplier who can't wait long for your payment (or even asks for an advance in exchange for the discount that would be granted to you in that case). Your invoice, that is, your receivable, is your asset - your customer will definitely pay for the goods, regardless of whether it is to you or to the factoring company. You "sell" that invoice to the factoring company, which practically buys it ahead of time, helping you to get the money as soon as possible (and then the factoring company will collect it from your debtor in a regular way and within a regular period). This saves you time by shortening the new import cycle. By assigning the invoice and receivable to the factoring company, you get cash that you can immediately use to pay your supplier and import the goods.

The process is quick and easy.

If you want to learn more about how FS can help your company grow and provide you with stable liquidity, contact us. .

Follow us. In the next text, we will explain how factoring can be used in the long-term, and through several one-time arrangements.