The professional cash credit is divided into three large families. It is used by all, or almost all, companies.
What is the cash credit for professionals?
Cash credit is a type of short-term professional credit that is used to finance one-time or recurring cash requirements for businesses. It is granted by the banks by signed contract or by simple verbal agreement. It allows the company to have for a limited period its account debtor.
Banks do not usually ask for a guarantee for cash credit, but they do not give it to all companies. It is often necessary to justify a good management of the accounts of the company despite the differences in cash it may suffer.
There are three main types of cash credit granted to professionals:
- The cash facility
- Bank overdraft
- Campaign credit
The cash facility
The cash facility is a very common cash solution. It consists of allowing the company to debit for a few days. This is a solution where the company must as soon as possible to put his account in positive. The cash facility is often not a contract but just an agreement between the bank and the company, so it is important to maintain a good relationship with your banker. This cash solution often coincides with the payment of receivables when the company has to pay wages or social contributions, for example.
The cash desk solution has a high cost for the company.
Bank overdraft consists of putting the company’s account in debit for several days or weeks. It is authorized for an indefinite period and stipulated in a contract with the bank. Bank overdraft can be very useful when the company has immediate cash requirements and is expecting a cash flow soon. It is essential for companies to obtain the authorization of a bank overdraft with their partner banks and to negotiate the tariff in order to cope with any incidents.
The bank overdraft solution is less expensive than the cash facility but also requires the payment of agios to the bank.
The campaign credit is granted to companies whose activity is seasonal. These are companies working only during the Christmas period or only in the summer. The campaign credit runs for one year and allows a break of several months. Banks take a higher risk with this type of credit since if the season is missed, the company will not be able to repay its overdraft. Credit institutions with campaign credits therefore require a stable financial liability to the company.