Financial products in the activities of small and medium-sized companies

Service Business

Each company uses several different financial products in its activities - popular RORs, i.e. savings and checking accounts, loans or leasing, are on the agenda. They help in the daily functioning of the company, enable the acquisition of the necessary machines and equipment, and support maintaining financial liquidity. The last of the mentioned functions of financial products is extremely important in the context of increasing problems with corporate solvency. Find out about financial products for small and medium-sized businesses!

Various types of loans as financial products for companies

A loan is an effective tool helping to maintain financial liquidity. Of course, the company is not sure whether it will receive the money at all, and if the bank's decision is positive - it becomes indebted and will be required to pay back the loan received with interest, also covering all costs related to insurance and loan servicing. At the same time, however, it will receive money to settle current liabilities or to carry out necessary investments, protecting its image among contractors. After all, no business owner wants to be associated with unreliability and financial problems.

Banks offer loans of various types - the basic division concerns the purpose of money. Working capital loans will be most helpful in maintaining financial liquidity, which are intended to finance current operations, i.e. purchase of goods and materials, equipment, etc. They may take the form of an overdraft facility that allows payments to be made up to the limit agreed with the financial institution. Another option are investment loans that will help in the development of modern technologies, allow the introduction of new solutions and subsequent savings. For the money from such a loan, the entrepreneur can therefore buy a modern machine or build a technological line.

Micro and small enterprises can also benefit from loans granted on preferential terms with state aid. An example of such a solution are loans with a de minimis guarantee, which can currently be of both a revolving and investment nature. These loans are very attractive, as evidenced by the ever-growing interest and extension of the scope of granted loans (initially only working capital loans were guaranteed by Bank Gospodarstwa Krajowego).

Operational and financial leasing

A very popular financial tool among companies from the SME sector is leasing. This solution allows you to obtain the necessary asset (and not only), without having to spend a large amount of money at one time. It also does not involve the company's debt - the entrepreneur is only obliged to regularly pay leasing installments in exchange for using the equipment that is the subject of the contract.

Basically, there are two basic types of leasing - operational and financial. The main difference between them is the method of settling individual contracts. An operating lease is characterized by the fact that the leased object remains the property of the lessor, who is responsible for making depreciation charges. In the case of financial leasing, it is different - the lessee shows a given asset in the register of fixed assets and depreciates it. This translates into differences in the way expenses related to the contract are settled.

An entrepreneur who decides to use operating leasing has the right to include the entire initial payment, all leasing installments, and fees related to the current operation of the vehicle as tax costs. In the case of financial leasing, this option includes, apart from depreciation write-offs, also the interest part of the installments and the daily costs of use.

Unreliable contractor? A factor will help!

Factoring is another product that improves financial liquidity, which is now also used by small and medium-sized companies. It allows you to recover capital in the case of invoices with a deferred payment date. It consists in the fact that the factor purchases a financial claim before its payment date. Of course, the factorer charges an appropriate fee for such a service, which in its effects will be less harmful than any debts owed by contractors. In a situation where the entrepreneur has many invoices that he can sell to the factorer, the cash injection received in this way can be used for current activities.

Until recently, factoring was a product intended for medium and large business entities. Currently, you can find more and more offers targeted at micro and small companies. The term "microfactoring" has even been used to describe this type of services provided by factoring companies to small entities.

The financial products described above are examples of tools most often used by companies from SMEs. It is worth remembering about them in the difficult financial situation of the enterprise. Often the cause of the company's collapse is not a loss, but a loss of financial liquidity. Appropriate financial management of the company, through the reasonable use of available products, can bring many benefits and help avoid unnecessary stress.