Financing should be judged as much by its cost as by its repayment rhythm. That rhythm determines, for example, whether cash stays locked up for three months or flows again right away. In this context, two banking mechanisms stand in contrast: the in fine loan and revolving credit.
The in fine loan: capital sits idle until maturity
In an in fine loan, the borrower only pays interest for the entire duration of the contract. Interest is calculated on the full amount borrowed, which doesn’t change. The principal is repaid in a single payment, at the final maturity date.
This mechanism is mainly used for rental property investment, where it offers a real tax advantage in exchange for a higher total cost than a standard amortizing loan.
However, when applied to inventory financing, this schedule creates a simple problem: even once the goods have long since been sold, the borrowed capital remains due until the date fixed in the contract. Repayment doesn’t follow the actual pace of sales, but rather a schedule decided at signing.
Revolving credit: a reserve that replenishes itself
Revolving credit is defined by the French Consumer Code (Article L.312-57) as a sum made available to the borrower, usable at their convenience within a limit agreed with the lender. The principle:
- A reserve is allocated
- The borrower draws on it in whole or in part
- Principal repayments replenish the reserve available for future use
In business, this mechanism takes the form of a confirmed revolving credit facility (RCF). It is typically negotiated for 3 to 5 years with a bank. As long as the contract is in effect, the company can draw down, repay, and draw down again.
This replenishment rhythm is precisely what Wavo replicates: capacity that’s used and then rebuilt through repayments, rather than capital locked up until a fixed date.
Yet the analogy stops there: fundamentally, revolving credit remains a loan. Debt appears on the balance sheet, and repayment is owed to the bank regardless of what the company actually sells that month.
What Wavo does differently
Instead of lending, Wavo buys the inventory. The company continues selling it to its customers as usual, then buys back from Wavo the corresponding portion as it sells. Unlike revolving credit, there’s no debt, no covenants, and nothing on the balance sheet.
This is where the rhythm of revolving credit becomes useful for understanding Wavo, without being confused with it: the inventory is bought back progressively, at the actual pace of sales, rather than according to a schedule fixed in advance like an in fine loan. If this anticipated pace is maintained, the capacity initially used frees up over time, and replenishes.
In concrete terms, this means a company can get a facility back up and running and finance a new operation just a few weeks after the previous one began, without rebuilding a financing file each time. Neither the fixed schedule of an in fine loan, nor the debt of revolving credit: repayment that follows sales, and capacity that comes back as soon as sales follow the expected pace. The best of both worlds, in short.
Going further
As you’ll have understood, the repayment rhythm deserves just as much attention as the stated rate: capital locked up until a fixed maturity and a reserve that replenishes as sales happen don’t finance the same growth trajectory.
