Follow on Google News
The micro e small businesses are an important force in the economy. Their creators often commit their entire life savings to opening their dream business - a store, a gym, a small factory. With their personal fulfillment, they generate income, employment and well-being for the consumers they serve. MSEs represent around 30% and are responsible for 51% of formal jobs, according to data from the Brazilian Business Support Service (SEBRAE) and the Getulio Vargas Foundation (FGV).
However, these companies don't always find a favorable environment in which to operate. Bureaucratic obstacles are imposed from the moment the company opens. Figures from the Brazilian Institute of Geography and Statistics (IBGE) show that in 2018, the survival rate among smaller companies was 74.4%. Among larger companies, the rate was 96.5%.
The crisis triggered by the pandemic has exacerbated the difficulties. Also according to SEBRAE and FGV, In April, 84% noticed a drop in turnover in 2020. In view of this, the demand for credit has increased: in April, 30% of MSEs were looking for resources for their business. In December 2020, this percentage jumped to 52%. Among the micro and small companies that applied for funds, 341 Q3-Q3 were successful, compared to 561 Q3-Q3 that were denied.
Following the rise in demand, the supply of credit also advanced throughout 2020. Data from the Central Bank shows that the balance of credit for legal entities rose by 21.8%. In the case of micro, small and medium-sized enterprises, the increase was a significant 31.6%.
Credit promotion programs for MSEs played a key role in this result. Launched in March 2020, Pronampe allocated funds to micro and small companies for working capital, investments and payment of operating expenses, with a maximum term of 36 months and a guarantee of Operations Guarantee Fund (FGO). When we finally get through the crisis, the big question will be how to guarantee easier and more sustained access to credit.
This is a concern that goes beyond borders. According to World Bank, As a result, MSEs are less likely to get bank loans and are limited to their own funds or the resources of family members. International Finance Corporation data reported by the World Bank show that among micro, small and medium-sized enterprises, the financial gap, i.e. the difference between potential demand and the supply of credit, reaches 87%.
Some initiatives seek to narrow this financial gap. We can mention the project that makes Pronampe the Federal Senate, and the recent creation of the Simple Credit Company (ESC). ESC allows individuals to lend their own resources - and only their own resources - to small businesses. We also mention the lending platforms peer to peer, The company has a number of initiatives that connect investors and small businesses.
While it is true that there are restrictions on access to credit, it is also true that some of the MSEs is able to satisfy its need for funds. How, after all, can a company increase its chances of obtaining credit on the market? Unlike large companies, small businesses operate without a specialized fundraising department. Whenever possible, it's a good idea to plan for credit that requires specific knowledge. This planning can be done with internal resources or through a specialist in outsourced credit. Some of the topics required are: preparing the company to receive the credit by adjusting operations; allocating the credit; preparing documentation; expected results; and mapping market offers so that the operation is successful for the company. MEP and the creditor.
The Positive data is another important ally of MSEs who are looking for credit. It's important to keep financial commitments up to date because this information helps to better assess credit behavior through the services of credit bureaus.
Micro and small companies have greater growth potential than those at the top. They can double, triple or grow enormously in size. This means that credit and an improved business environment can bring incalculable gains to the entire economy, providing jobs and social welfare.
Thanks for reading! Access other content at ANBC website.
By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor
