Advance capital as alternative business loan as a new standard

More than half a century after the onset of the global financial crisis, access to finance for entrepreneurs remains problematic throughout the world. The global financial crisis of 2008-2009 has deeply changed the business environment for entrepreneurs, and access to finance has been particularly affected. In many countries, the crisis has exacerbated the financial difficulties that are usually encountered, mainly due to asymmetric information about capital markets and the accumulation of financial resources by business firms such as advance capital as alternative business loan.

In all countries, bank lending remains the most common form of external financing, but faced with stricter prudential rules, banks are reviewing their business model, and the credit deficit is increasing. It is becoming increasingly apparent that entrepreneurs are more susceptible to financial reforms and the speed of their implementation than other entities, since they are more dependent on bank financing than large firms, and to a lesser extent. adapt to the radical changes in the credit markets. There is a vulnerability of the sector to the changing conditions of bank lending …

Advance capital for small businesses. The financial crisis has exposed vulnerability to changes in bank lending conditions. The chronic need to strengthen financial structures and reduce dependence on borrowing is becoming ever more urgent. In fact, many companies were forced to increase their debts in order to survive the crisis. In addition, the government’s response to the crisis likely exacerbated the problem of excessive debt; For example, emergency stabilization programs often preferred mechanisms that allowed firms to increase their debt (for example, direct loans, loan guarantees), as other sources of financing became increasingly rare.

In addition, after the crisis, banks in many countries reduced their balance sheets in accordance with stricter prudential rules. Inadequate capitalization and excessive debt impose costs in the form of higher interest rates and increase the risk of financial difficulties and bankruptcy. … just like the limits of conventional debt instruments for new, innovative and fast-growing companies.

Capital advance for businesses. Entrepreneurs are often very dependent on traditional debt instruments to meet their initial, monetary and investment needs, but these instruments do not fully meet the various financial needs at different stages of their investment cycle. a life. In particular, debt financing is not suitable for new, innovative and fast-growing companies, which are at the upper level of the risk and profitability range. The “funding gap” that these companies are suffering from is often a “capital gap.” Significant resources may be required to finance projects with high growth potential, while related benefits are often difficult to predict.

These financial constraints can be especially severe in the case of start-up companies or small enterprises whose business model is based on intangible assets that are very specific to the business and which are difficult to use as collateral in a loan agreement. classical. A capital shortage also affects companies that seek to make significant changes to their business, such as changes in ownership or control. However, for most companies, there are several alternatives to conventional debt instruments.

This poses a serious problem for 4 politicians who seek to support sustainable recovery and long-term growth, as these companies are often at the forefront of job creation, the use of new technologies and the development of new business models.

Financial planning as the basis for liquidity planning All financial management decisions, including profit calculation decisions, are part of financial planning. For example, it is possible to establish the liquidation of profit only if certain parameters are observed: one of them may be that the share of equity should exceed 40%. An important part of financial planning is also all decisions regarding investments: for example, a company can decide to make investments only if it manages to finance at least 35% of the corresponding amount at its own expense. Thus, financial planning defines the general framework for corporate finance management, and also sets a number of principles. These guidelines determine financial planning for the next five to ten years, which also affects the company’s liquidity management in the short term.