In a country with so many challenges to raise potential GDP growth, issues related to investment capacity and the financial health of companies are decisive. The Companies Map published by the Ministry of Development, Industry, Trade and Services showed that, at the end of the first four months of 2024, there were a total of 21.7 million active companies in the country.

These companies' access to sources of funding for their activities depends on numerous factors, such as the size and financial health of the business. A specialized literature shows a gap related to size: in general, micro and small companies have less access to credit. In Brazil, international comparisons show that the size of the credit market, regardless of segment, is below that observed in the rest of the world. The smaller presence of credit was demonstrated in a report published in 2020 by the World Bank, which shows that domestic credit to the Brazilian private sector amounted to 72% of GDP, while the same index, in the same period, was 216% of GDP in the United States and more than 113% in Chile.

There is, therefore, a challenging road ahead to improve the credit landscape for companies of all sizes, and the efforts of the players in the credit ecosystem to facilitate this path are always very welcome.

It is to be expected that, as lenders, both financial institutions and other companies that sell in installments will be cautious when offering credit, both because of default indicators and because of the challenges of obtaining relevant data from potential borrowers in order to reduce risk.

It is up to companies to assess the real need to take out credit. It is essential for borrowers to make realistic projections to ensure that there will be sufficient return to offset the costs of the intended operation - even more so in the current situation of high interest rates, when prudence needs to be redoubled. Borrowing at high interest rates and in a volume that exceeds your ability to pay can make business unfeasible, thus increasing default rates. Data from the credit bureau sector show that over the course of 2023, the number of companies with negative credit ratings rose from 6.4 million to 6.6 million.

This brings us to a relevant question: knowing the complexity of the credit granting process, how can we increase the chances of being successful when applying for credit on the market?

There are some steps to be taken before even talking to the lender. A good start is to draw up a business plan, make realistic turnover projections and payment estimates that take into account the benefits that the new money will bring to the company.

Large and medium-sized companies generally have more professional structures, but care must be taken when obtaining credit for companies of all sizes. Throughout the process of applying for credit, questions will arise that the entrepreneur or manager needs answers to. Putting yourself in the position of the creditor helps, as they need to know who they are applying for credit for and the chances of receiving their funds back, plus the agreed financial charges. Whether you're a big businessman whose credit may be pre-approved, or a small businessman who needs to seek credit, which isn't always so easy, consider these thoughts. By doing this exercise, your financial education will already be up and running and your chances of obtaining credit to expand your company's investments will increase:

• PURPOSE: can you prove to the lender how the credit will be used? If it is for investment in fixed assets or expansion of the production line, can you demonstrate when the investment will start to pay off? If it's for working capital, is it easy to explain how the income will be generated to pay off the loan?
• DOCUMENTATIONIt is important to be able to prove that the company is in good standing, to present documentation on turnover, cash forecasts, resources committed to stock, etc. For small business owners, proof of income and business references are essential. Are the legal entity's and partners' documents up to date? Is the company's incorporation documentation and tax data in order? Are negative income tax and other tax certificates available?
• GUARANTEES: what kind of guarantees can be offered? Are there any real guarantees (mortgage/disposal) or personal guarantees (guarantor/guarantor) to offer that are compatible with the credit line requested? In the case of small business owners, if you think you don't have enough collateral, it's important to prepare for a plan B: to count on the backing of loan guarantee funds to complement them. Examples include Sebrae, and the FGO, from Bank of Brazil.

With this exercise in self-knowledge, entrepreneurs will see more clearly their ability to answer basic questions and possible bottlenecks in financial management. With the homework done, access to credit via traditional financial institutions and the numerous credit channels that have emerged with the digitalization of financial services can become easier.

Another fundamentally important measure is to monitor the company's credit rating and keep it at a high level. This is a top priority.

Credit bureaus provide access to credit scores and offer recommendations to companies of all sizes on how to improve them. Here are some examples:

• Having the company as the holder of water, energy, gas and telephone bills;
• Keeping payments up to date;
• Avoid using the corporate overdraft limit and pay your corporate credit card bill in full when it is due;
• Maintaining up-to-date registration information in credit bureau databases and with creditors;
• Make sure that the creditors with whom you have a relationship are sending the company's history to the Cadastro Positivo database, as this database contains the information on payment history that will be used to calculate the credit score.

Credit is a tool for the well-being of both companies and individuals. For companies, even with the risks inherent in any economic activity, credit makes it possible to generate future income and create businesses, impacting on income and employment.