How to finance your operating needs: The complete guide

What is operating cash flow?

BFE corresponds to the funds required to cover your company's operating cycle. It is calculated according to the following formula:

BFE = Inventories + Trade receivables - Trade payables

A positive EBT indicates that your company needs to finance the gap between sales receipts and the payment of current expenses. This situation, while normal for most companies, can create significant cash flow pressures.

BFE components

• Inventories: value of goods awaiting sale - Trade receivables: amounts due from customers (payment terms)
• Trade payables: amounts due to suppliers

Why finance your BFE?

BFE financing is crucial to maintaining your company's financial equilibrium. On the one hand, it ensures business continuity by guaranteeing payment of salaries and fixed charges. On the other, it enables you to seize growth opportunities without compromising your financial stability.

Companies that control their BFE can :

• Invest in marketing and customer acquisition- Recruit key talent at the right time- Build strategic inventories- Negotiate better terms with suppliers

BFE financing solutions

1. The Karmen loan

The Karmen loan revolutionizes the traditional approach to business financing. This innovative solution is based on the company's future revenues rather than on asset guarantees. To find out how you can obtain financing based on your recurring revenuesit's essential to master the fundamentals of this approach, which enables you to rapidly improve your liquidity.

Advantages of the Karmen loan:- Non-dilutive financing (no transfer of equity shares)- Quick to obtain (48 hours)- Flexible repayment indexed to sales- Amount up to 40% of annual sales (maximum €5M).

The process is remarkably simple: after analyzing your company's recurring revenues, a suitable financing amount is defined. Repayment is then made in fixed or variable installments, depending on the product chosen, adapting to the seasonality of your business and your income statement.

2. Invisible factoring

Modern factoring transforms the management of your trade receivables. Unlike traditional factoring, this solution does not require the assignment of receivables, thus preserving your commercial relationship while improving your free cash flow.

The process is smooth and automated:- Invoice submission on the platform- Financing within 24 hours- Automatic repayment on customer payment- Renewal of financing capacity

This approach enables you to finance 100% of your B2B invoices immediately, with no impact on customer relations, while benefiting from a revolving credit line that adapts to your growth.Outstanding amounts are managed transparently, enabling you tocollect your invoices quickly. Karmen Factor perfectly illustrates this innovation by offering factoring without assignment of receivables.

3. Invoice financing

Invoice Finance is specifically designed to meet the needs of B2B companies faced with extended payment terms. This solution targets invoices between €5,000 and €50,000 with payment terms of 30 to 90 days.

The main advantage lies in the fact that no personal guarantee is required, and pricing is transparent, enabling managers to preserve their personal assets while optimizing their cash flow.

4. Traditional banking solutions

Banks offer several products to finance BFE, each with its own specific features:

The authorized overdraft or overdraft current account is a flexible, one-off solution, but its high cost over time and its dependence on the banker 's approval make it less attractive for regular use.

Short-term credit offers short- to medium-term financing (3 to 12 months), but often involves substantial collateral and a lengthy, complex process that can hamper entrepreneurial responsiveness. For a more modern approach, discover the best short-term financing solutions available on the market.

Conventional bank loans often require fixed asset guarantees and can impact your available working capital.

5. Participative financing

Crowdfunding can be an interesting alternative for some companies, particularly when it comes to financing specific projects or product launches. This approach makes it possible to mobilize a community while validating market interest.

How do you choose the best solution?

Selection criteria

The selection of the optimal solution depends on several interdependent factors:

• Fast turnaround: urgent cash needs
• ‍Cost offinancing: commission vs. interest rate
• ‍Flexibility: adapting to company revenues
• ‍Guaranteesrequired: impact on personal assets
• ‍Duration offinancing: short-term vs. medium-term

Comparative table of solutions

Optimizing BFE management

Preventive strategies

Proactive BFE management begins with optimization of the three main components. Negotiating payment terms enables us to reduce customer lead times while extending supplier lead times, thus creating a natural leverage effect on cash flow.

Improving inventory management is another major lever:- Optimize rotation to reduce downtime- Implement demand forecasting tools- Negotiate flexible supply conditions.

Speeding up cash receipts means setting up efficient reminder systems and automating invoicing processes. Last but not least, diversifying sources of financing means combining several solutions to optimize the overall cost of capital.

Steering tools

Effective cash flow management requires the right tools. The cash flow dashboard provides real-time monitoring of cash flows, while the BFE forecast enables you to anticipate future needs. Performance indicators such as DSO (Days Sales Outstanding), DPO (Days Payable Outstanding) and inventory turnover provide a clear view of operational efficiency.

For SaaS companies, there are special features to consider. Our practical guide to cash management for SaaS details these sector-specific issues, and suggests solutions to optimize your net cash position.

Karmen solutions to finance your BFE

Karmen offers a comprehensive range of solutions tailored to the specific needs of modern businesses. Founded in 2021, this French fintech specializes in short-term financing for digital SMEs.

Karmen Loan

Karmen financing is aimed at digital companies with recurring revenues, offering a non-dilutive alternative to traditional fundraising. This solution provides up to 40% of annual sales, with repayment tailored to the company's performance.

Karmen Factor

Karmen's invisible factoring solution enables you to finance your customer invoices without transferring receivables, thus preserving your business relationships while optimizing your cash flow. Unlike traditional factors, Karmen does not interfere with the customer relationship and accepts all types of invoices, managingoutstanding amounts transparently.

Advantages of the Karmen approach

The Karmen approach is characterized by four fundamental pillars that address the modern challenges of corporate finance:

• Speed: financing obtained in 48 hours maximum thanks to a 100% digitalized platform‍
• Simplicity: fully automated process with no administrative paperwork
• ‍Transparency: no hidden fees, clear commission displayed from the outset
• ‍Flexibility: solutions tailored to each company's profile and seasonality

This philosophy is backed up by personalized support with a single point of contact for your project, guaranteeing a relationship of trust and a thorough understanding of your specific challenges.

Conclusion

BFE financing represents a strategic challenge for the survival and growth of companies. With so many different solutions available, it's essential to choose the financing method best suited to your company' s specific needs and financial situation.

Modern financing solutions such as Karmen loans and invisible factoring offer attractive alternatives to traditional bank financing. Their speed, flexibility and non-dilutive approach meet the needs of digital companies seeking financial agility.

The key to success lies in a balanced approach combining operational optimization of BFE and judicious use of appropriate financing solutions. This strategy not only overcomes short-term cash flow difficulties, but also creates the conditions for sustainable, controlled growth.