Cashflow management and alternative financing for businesses

Alternative financing for business

Liquidity and cash flow management issues facing businesses and alternative finance solutions were the main theme of an online seminar organised by the Institute of Certified Public Accountants of Cyprus (ΣΕΛΚ) in cooperation with Eurivex Trade Finance and Infocredit.

Prudent cash flow management has nowadays become a very pressing issue for most businesses.  Following the massive increase in raw material prices and the disruption in the supply chain for most goods, suppliers have been forced to hike prices to maintain margins, and revise inventory policies to avoid stockouts, thereby placing enormous liquidity pressure on the buyers of the goods, who are now called to pay much higher amounts on purchased goods and services.

“The need to find fast, flexible and competitively priced alternative finance solutions has become more critical,” said Mr. Athos Kyranides, Consultant at Eurivex Trade Finance Limited in charge of trade finance operations.

By far the most effective funding solution for Small to Medium Sized Enterprises (SMEs) is to consider factoring or invoice discounting, which enables them to offer credit to their customers, without burdening their liquidity, since their credit invoices are assigned to the alternative finance provider in return for immediate cash.

“When an SME sells its credit invoices for immediate cash, it does not need to pledge personal guarantees or mortgage tangible assets. The assigned invoice is the only collateral required,” said Kyranides. Consequently, even starts-ups are eligible to secure funding for growth if the quality of their debtors or trade receivables is good, even though there is little or no track record, tangible security and other collaterals.

ETFL’s services allow businesses to reduce credit risk as Eurivex combines financing with credit insurance through its arrangement with Allianz Trade (Formerly Euler Hermes) whereby the credit invoices issued to buyers are insured against default.


Cash flow management

Banks have traditionally asked business owners to give personal guarantees as a condition of a finance deal in addition to mortgaging their family assets as additional collateral. With banks tightening lending criteria, the situation has got worse.

“The problem with many SMEs is that the vast majority are not properly capitalized.  Once the business idea starts generating sales, and the business starts to grow, the only way to secure working capital is to ask the bank for a loan, or turn to the alternative finance provider,” said Mr. Antranic Keremidjian, Senior Manager at Eurivex Trade Finance Limited.

Mr. Keremidjian explained why businesses should forecast their cash flow needs especially when they are experiencing rapid growth. Failure to predict and arrange funding for working capital in time, is the main reason for the collapse of growing businesses.

The seminar is available free of charge at the following link for a limited period of time.


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