Cash credit: which one to choose and how to obtain it?

What is a cash credit?

Cash loans are short-term financing solutions. They enable companies to have a debit balance for a period of varying length, not exceeding twelve months.

Various financial institutions (banks, factoring companies, etc.) offer solutions to offset the company's negative balance:

• by allowing a negative balance while maintaining the ability to perform transactions;
• by granting an advance to compensate for unpaid customer invoices;
• by granting a cash loan tailored to its sector of activity and its ambitions.

These various approaches aim to cover working capital requirements (WCR). When this requirement is positive, it means that the company is carrying out more operations than its resources allow. Short-term cash financing makes it possible to restore the company's financial balance and prevent a situation of insolvency.

Unlike medium- or long-term investment financing, which spans several financial years, cash loans offer temporary solutions. Their purpose is not to finance equipment or buildings, but rather to provide urgent liquidity during a difficult but limited period of time.

Why apply for a cash loan?

There are various reasons why you might approach your bank to request a credit line or cash loan for your business:

• a time lag between cash inflows and outflows;
• delays in payment from your customers;
• a need for financing to build up inventories;
• rapid expansion generating an increased need for liquidity;
• seasonal or one-off expenses.

Cash credit can sometimes be a backup solution, helping to avoid insolvency leading to receivership or bankruptcy.

What are the different types of cash credit for a business?

Cash loans offered by banks

Banks offer various solutions to meet the cash flow needs of businesses:

• cash facility;
• overdraft authorization;
• campaign credit ;
• discount;
• Dailly assignment.

Overdraft facility

An overdraft facility is a very short-term cash loan with a limited duration. This type of credit is used when there are minor cash flow discrepancies. Typically, your company can only have a negative balance for a maximum of 15 days per month. An overdraft facility allows your bank to tolerate a negative balance while allowing operations to continue despite this situation for a short period of time.

Overdraft authorization

An overdraft facility is a more permanent form of cash credit than a cash advance facility. It allows the company to have a negative balance for a period ranging from a few days to a full year. The bank sets a debit limit, allowing you to continue your various transactions until you reach the authorized limit.

An authorized overdraft facility is particularly useful when you anticipate recurring cash flow gaps.

The campaign credit

This form of cash credit is intended for businesses with seasonal activity, whose operating cycle therefore has specific characteristics and suffers the effects of periods of inactivity. These structures can obtain a repayable advance as soon as they receive their first cash inflows during the peak season.

Campaign credit can take several forms:

• an overdraft facility for the period corresponding to the campaign;
• a discount line;
• a warrant accompanied by a discount. In this scenario, the bank, in order to limit its exposure to risk, takes collateral (warrant, or pledge) on the company's products. This practice is common in the industrial and agricultural sectors.

The term of the seasonal credit is generally nine months, but may be extended.

The discount

Discounting offers the possibility of obtaining an advance on invoices still awaiting payment by customers. The bank acquires the debt represented by a commercial paper (bill of exchange or promissory note) before its due date, in exchange for a commission. It becomes the owner of the debt, and it is to the bank that the customer (whose invoice has been transferred) must make payment on the due date.

However, the company will suffer consequences in the event of non-payment by customers and will become liable to the bank that granted the discount. You must therefore ensure that the invoices you submit to your bank for discounting are reliable.

The Dailly assignment

A Dailly assignment is a mechanism similar to discounting, whereby a company assigns its receivables to its bank, which in return pays the company the amount of those receivables in the form of an advance. The Dailly assignment is limited to a maximum term of one year. Unlike discounting, however, the invoiced customer is not systematically informed, and your company retains the administration of its receivables.

Alternative financing solutions to banks

Faced with the constraints and delays of traditional banking institutions, new financing solutions are emerging to meet the specific needs of modern businesses. Among these alternatives are:

• Innovative financing solutions such as Karmen;
• Traditional factoring;
• Aid from BPI France;
• The commercial paper.

Karmen: a fast and flexible alternative

Karmen is revolutionizing access to financing for French businesses. Unlike traditional banks, Karmen offers a 100% digital process that allows businesses to obtain financing in just 48 hours, without the usual administrative red tape.

Karmen's strength lies in its modern approach: analysis is based on actual company data (read-only banking data) rather than collateral. Karmen offers two complementary solutions tailored to the different cash flow needs of businesses.

Karmen Loan: Growth financing

Karmen Loan is a short-term financing designed to accelerate the growth of your business. It is an instant, non-dilutive line of credit that allows you to finance your growth needs without giving up equity.

Key features:

• Amounts: From €30,000 to €5,000,000
• Duration: From 1 to 24 months
• Timeframe for obtaining: 48 hours after validation of the file
• Repayment: Monthly and linear, with the option of deferral. No penalty for early repayment.
• Cost: Fixed and transparent commission between 0.9% and 1.1% per month (depending on the term, amount, and company score). No interest rates, no hidden fees, no personal guarantee required.

Eligibility requirements:

• Company based in mainland France
• At least 2 years of seniority
• Over €300,000 in revenue over the last 12 months
• Positive equity and sound payment history

This financing can be used for a variety of purposes: working capital financing, inventory acquisition, recruitment, marketing campaigns, product development, or building up a safety net.

You will need to closely monitor your company's financial health, based on key indicators such as overall net working capital (OWC).

Karmen Factor: Financing customer invoices

Karmen Factor represents a major innovation in the field of factoring. Unlike traditional factoring, this solution allows you to receive immediate payment for your outstanding customer invoices, while retaining control of customer relationship management.

Key features:

• Principle: You instantly receive the amount of your B2B invoices, then reimburse Karmen once your customer has paid you.
• Covered payment terms: 30, 60, or 90 days
• Financing: Up to 100% of the amount of your B2B invoices
• Total invisibility: The invoice is never transferred to a third party; it remains in your hands. Your customers are never informed that you are using this financing option.
• Refund: Automatic as soon as your customer pays you
• No guarantee: No security deposit, no deposit, no assignment of invoices

Eligibility requirements:

• Company based in mainland France with at least 2 years' seniority
• B2B invoices only, with payment terms of 30 days or more
• Over €300,000 in revenue over the last 12 months
• Positive equity and sound payment history

☝️ Good to know: Karmen Factor differs from traditional factoring in several key ways. There is no transfer of invoices, your customers are never notified, you retain full control over your business relationships, and the process remains completely confidential. The credit line evolves with your needs and supports you over the long term.

The Karmen process in 3 steps:

1. Eligibility test (2 minutes): Instantly check if your company iseligible
2. Account creation and synchronization (8 minutes): Connect your banking tools in read-only mode thanks to openbanking.
3. Obtaining funds (48 hours): Receive your financing offer and access the funds once the offer has been approved.

With more than 1,000 companies financed and a rating of 4.9/5, Karmen has established itself as an effective complementary solution for French SMEs and microbusinesses. Simulate the impact and cost of a Karmen loan:

Conclusion

Cash credit is an essential financial tool for any business facing short-term liquidity needs. From traditional banking solutions such as cash facilities or overdraft authorization to more specialized options such as discounting or Dailly assignments, each cash credit has its own specific characteristics. Today, new digital solutions such as Karmen offer a modern alternative: obtaining financing within 48 hours, without personal guarantees and with a 100% online process.

Choosing the right cash credit depends on several factors: the urgency of your need, the amount required, the desired financing term, and your financial situation. Once you have made your choice, you need to maximize your chances of obtaining a cash loanwhen you apply online!