A financial tool that every SME should take advantage of

Everyone who has the responsibility of running a company or business knows how complex the financial situation can become at certain times, especially when the business begins to need more funding to continue growing.

MSMEs that supply large companies must wait on average between 30 and 45 days to collect the invoices issued to them and many times receive deferred payment checks as payment. Since the deferred check discount rate of their large clients is generally lower than their other financial options, SMEs turn to their discount as a financing tool for their working capital. What many do not know is that discounting or negotiating Checks are not the only financing tool, but they are also not the best.

In recent times, the use of the Electronic Credit Invoice (FCE), especially in high-growth sectors such as the entire ecosystem of Mipyme providers that works around the energy industry. This instrument opens the possibility of negotiating the invoices that are issued to obtain financing at very competitive rates, immediately and without occupying bank lines.

4 advantages of the FCE over the deferred paycheck:

• discounting an FCE does not imply indebtedness. One of the important advantages of the FCE Regarding the check, the discount operation is ¨No Recourse¨, that is, without guarantee of payment by the SME. It is essential to understand that discounting a FCE does not mean indebtedness for the Mipyme, it does not use its bank credit lines nor does it appear as a debt in the Central Bank of the BCRA debtors. This is a key concept that all SMEs should consider when evaluating the convenience of discounting an FCE, since the macroeconomic instability that our country is going through and the very high interest rates in force for many years have generated a very adverse position on indebtedness in most SMEs. Understanding that the FCE discount does not imply debt for the Mipyme, the analysis of the convenience of carrying it out should focus on the following points:
• Is there any financial debt that could be canceled with the proceeds of the discount (bank overdraft, check discount, etc.)?
• If there is no debt, could the result of the discount be placed in Money Market operations at rates higher than the cost of the discount and thus have a liquidity cushion for contingencies?
• Are there suppliers that would be willing to give prompt payment discounts that are higher than the cost of discounting the FCE?
• Is it important for the SME to reduce its liabilities in order to improve its balance sheet?

From the foregoing, it is clear that carrying out a FCE discount operation is a very convenient option, even in cases in which SMEs do not need funds for their working capital, since they can place the net amounts received in intraday operations that most likely they will give you a rate higher than the cost of the discount and have the funds available for any emergency or opportunity that arises.

R.risk reduction. As indicated in the previous point, FCE discount operations are necessarily without guarantee of payment by the SME, because this was determined by the Productive Financing Law that gave rise to the instrument. This is a very important point, although it is not usually taken into account by SMEs that supply large companies, since they start from the assumption that their large clients are not going to default.

However, in recent years, there have been several cases of large companies, leaders in their sectors, that suffered major crises and had to resort to the preventive bankruptcy tool. Many of the SME suppliers of these companies regularly received deferred payment checks as payment for the invoices issued to them for the sale of their products or services. The suppliers that discounted said checks were jointly and severally bound to pay through their endorsement. This situation would not have occurred if instead of discounting deferred checks, the providers had asked their large customers to accept the FCE and then discount them, since in the event that they were unpaid, the banks or other investors discounters would not have the right to claim payment from the SME.

A large percentage of SMEs are still unaware of how the FCE works and the different alternatives available for negotiating them, and for this reason they continue to request their large customers to deliver deferred payment checks to cancel their invoices.

Two years after the implementation of the FCE, and having abundant negotiation options and competitive rates, we understand that the alternative of discounting FCE is clearly more convenient for SMEs that supply large companies than the deferred check discount operation. since the first one eliminates the commercial credit risk.

• Limmediate liquidity. The FCE, once accepted by the large receiving company, can be negotiated instantly without the need to open an account in a specific bank, present a credit file, patrimonial information or guarantees or counter-guarantees.
• youcompetitive handles. As the FCE its an instrument sme By definition, banks interested in buying them apply to these operations part of the SME Financing quota to which they are obliged, carrying out most of the operations at the rates indicated by the BCRA for this segment. On the other hand, investment funds for SME instruments that operate in the capital market can also apply funds to the purchase of FCE since it has been defined by the CNV as an SME instrument.

By way of conclusion, for all the reasons stated, and considering that the discount rates of FCE and first-line CPD are very similar, we understand that for any SME provider of a large company, it is much more convenient to request acceptance from their client. of the FCE than the delivery of a CPD.

SME Market Specialist President & CEO at InvoiTrade