A company's funding needs begin with its operations: how long it takes to collect receivables, when it pays suppliers, how much inventory it holds, and what commitments it makes to support growth. Its funding structure should reflect that operating cycle and its ability to generate cash.
The data help illustrate why this matters. In Banco de México's survey for the second quarter of 2026, 60.9% of surveyed companies reported using trade credit from suppliers and 24.5% reported using commercial bank credit. These figures show the percentage of companies using each source, not each source's share of the total amount financed. Banco de México, August 20, 2026.
For a CFO, the task is to combine funding sources that fit the intended use of proceeds, the timing of cash generation, and the business's capacity to bear risk. A sound structure must remain viable when sales take longer to materialize, financing costs rise, or a refinancing window closes.
1. Understand what is being financed
Distinguish between temporary working capital needs, capital investment, acquisitions, and growth projects with uncertain returns. Each calls for an assessment of when it will generate cash and, where debt is involved, the source of repayment.
The obligations attached to each source also differ. Operating liabilities arise in the course of business; debt financing entails contractual payment obligations; equity investors bear risk in exchange for a residual claim on the business. Asset-based financing is structured around receivables, inventory, or equipment and may overlap with these categories. These are economic distinctions; accounting classification requires a review of the contracts and applicable standards. OECD, financing instruments framework.
A profitable company can run out of cash if the obligations used to finance its assets fall due before those assets generate cash. The starting point is therefore to align cash generation with scheduled payments.
2. Manage operating sources of funding
Negotiating payment terms with suppliers can reduce cash requirements. Assess the cost of forgoing early-payment discounts, the other purchasing terms, and the supplier's ability to sustain the agreed payment period. Unilaterally delaying payments can damage a relationship that is essential to business continuity.
Customer advances, contracts with milestone payments, and prepayment arrangements can fund production or service delivery. In return, the company must deliver the agreed goods or services and may have to refund payments under the terms of the contract. Using those funds for unrelated projects can leave the original commitment underfunded.
Improving collections, inventory turnover, and purchasing discipline can release cash, although operational constraints limit how far these improvements can go. Retaining and reinvesting internally generated cash also carries an opportunity cost: it competes with other uses, including dividends and alternative investments.
When a financial institution pays suppliers under a financing arrangement, assess the substance of the arrangement, its accounting presentation, and concentration risk. IFRS Accounting Standards require information that enables users to assess how supplier finance arrangements affect liabilities, cash flows, and exposure to liquidity risk. IFRS Foundation, May 2023.
3. Finance assets and receivables
Factoring provides cash in advance through the sale or assignment of receivables. In recourse factoring, the seller of the receivables remains liable to the factor if the customer fails to pay under specified circumstances. Nonrecourse factoring transfers the credit risk covered by the contract to the factor; the seller may remain liable for commercial disputes attributable to the seller. The customer's credit quality, invoice eligibility, reserve holdbacks, and concentration limits all matter. Bancomext, factoring guide.
The label “nonrecourse” does not, by itself, establish whether a receivable qualifies for derecognition. IFRS 9 requires an assessment of the transfer of risks and rewards and, where relevant, control. IFRS Foundation, staff paper AP9B, April 2023, Appendix B: IFRS 9 derecognition criteria.
Leasing allows a company to use an asset in exchange for periodic payments. Its suitability depends on the initial cash outlay, maintenance and insurance costs, contractual flexibility, residual value, and termination provisions. Under IFRS 16, a lessee generally recognizes a right-of-use asset and a lease liability, subject to the standard's exemptions. The economic assessment should take these commitments into account. IFRS 16.
In both cases, a CFO should assess how asset encumbrance and restrictions on assets or receivables affect the company's ability to raise additional financing.
4. Choose lenders and negotiate financial flexibility
Commercial banks, development banks, Mexican nonbank finance companies known as SOFOMs, and private credit funds can play complementary roles. The choice depends on the lender's risk appetite and expertise, as well as the financing currency, maturity, collateral requirements, and the lender's ability to execute the transaction. In Mexico, SOFOMs' principal activities may include lending, finance leasing, and factoring. CNBV, institutional overview.
A revolving credit facility can fund the working capital cycle; an amortizing loan can finance an investment with predictable cash flows. Private credit funds may offer tailored structures, but any comparison should account for fees, collateral requirements, covenants, and repayment, prepayment, and termination terms.
Review covenants carefully, including requirements relating to leverage and coverage ratios, as well as restrictions on dividends, additional borrowing, and asset disposals. An attractive interest rate is less valuable if the financing terms leave insufficient headroom to absorb a weak quarter.
Distinguish between a committed facility, available subject to agreed conditions, and an uncommitted facility, whose availability remains at the lender's discretion. Lender diversification is more valuable when it also reduces maturity concentrations, reliance on the same collateral, and the risk of losing access to funding.
5. Consider equity and hybrid instruments
When the payback period for an investment is long or uncertain, additional debt can place excessive pressure on liquidity. Equity from existing shareholders, strategic investors, or private equity funds can finance this stage and absorb losses, subject to the agreed rights and terms.
Negotiations cover valuation, equity dilution, corporate governance, veto rights, and the investors' investment horizon and exit expectations. In a sale of existing shares, the proceeds go to the selling shareholder. To fund the company, the proceeds must go to the company itself, for example through the issuance of new shares.
Mezzanine financing and convertible instruments combine debt and equity features. They may include subordination, performance-linked returns, or conversion into shares. In addition to the coupon, the assessment should consider accrued interest or returns, payment priority, and potential equity dilution. Accounting classification depends on the instrument's terms. OECD, hybrid finance.
The central question is how much risk each capital provider can assume and what rights it receives in return.
6. Access capital markets
Mexico's BMV and BIVA exchanges provide routes for companies to issue securities. Exchanges provide market infrastructure and rules; capital comes from investors who purchase the securities, with intermediaries arranging their placement. A listing alone does not guarantee a successful offering. BMV, listing process.
Bonds and Mexican debt securities known as certificados bursátiles allow companies to raise debt financing with different maturities and terms. A primary equity issuance raises capital for the company and gives investors ownership rights. Securitization uses assets or receivables to back securities, typically through a special-purpose vehicle or trust. Its viability depends on the quality of the underlying cash flows, legal structure, servicing arrangements, and investor protections. Securitization does not automatically remove debt from the balance sheet or qualify assets for derecognition; the accounting treatment depends on the contracts and the applicable accounting analysis. BMV, instruments; BIVA, listing alternatives.
Capital markets access involves upfront and ongoing costs for structuring, legal advice, auditing, placement, listing, credit ratings where applicable, and disclosure. The transaction size must justify these costs. Companies also need appropriate corporate governance, reliable information, and the capacity to meet ongoing obligations under the chosen issuance route. BMV, listing and maintenance fees; BIVA, requirements by registration route.
International markets can broaden a company's investor base through debt or equity issuance, whether in public offerings or private placements under the applicable regulatory framework. Accessing these markets brings additional legal, disclosure, and execution requirements. The SEC, for example, distinguishes between registered and exempt offerings by foreign issuers. SEC, foreign issuers.
A lower interest rate on foreign-currency debt should be assessed alongside hedging costs, fees, and residual risks. The currency, amount, and timing of cash flows available for debt service should align with the corresponding payment obligations.
7. Bring the pieces together and stress-test the structure
Consider a hypothetical manufacturer that wins a major contract and needs to build inventory and acquire machinery. It could negotiate a customer advance tied to deliveries, agree on sustainable payment terms with suppliers, and factor eligible invoices. It could finance the machinery through a lease or longer-term debt. If expansion involves developing a market with uncertain demand, an equity investment could absorb part of that risk.
The company would need to verify that the same receivables are not subject to conflicting assignments or claims, that debt maturities align with collections, and that it has enough liquidity to absorb delays. It could consider a securities offering once its scale and readiness justify the transaction.
Before committing, the company should stress-test lower sales, slower collections, higher interest rates, and a temporary loss of access to refinancing. The analysis should show minimum cash balances, debt service requirements, headroom under financial covenants, and available mitigating actions. EBITDA helps assess operating performance; cash is needed to meet payment obligations.
Five questions for the board
- What are we financing, and which cash flows will support the resulting obligations?
- How will the maturity, currency, and payment schedule affect our liquidity in a downside scenario?
- What is the all-in financing cost, including fees and hedging costs, and what are the implications of collateral requirements and potential equity dilution?
- What restrictions are we accepting, what rights are we granting, and how much flexibility will we retain?
- What happens if we lose access to a funding source or cannot refinance in time?
A sound funding structure supports operations and investment while preserving flexibility under different scenarios. Its quality depends on how well it fits the business and enables the company to meet its commitments over time.