Credit: risk or opportunity?

If you are an entrepreneur or manager of a company, you have certainly been through those troubling times when you wonder if the cash resources will be sufficient to meet business commitments.

More capital to invest, expand your business 

On the other hand, you may also have wondered what it would be like if you had more capital to invest, expand your business and seize market opportunities.
In either case, the search for credit is a good solution. However, it is common for some business owners to still view the loan as negative and not as a solution that will allow a period of peace of mind for the company or help leverage it into growth opportunities.

This decision depends on several factors and the main one that we must carefully consider is the moment the company is, and what will be the destination of the use of capital. Therefore, I think it is worth an important reflection. When should we apply for a loan?

Borrowing for this purpose is positive

Borrowing for this purpose is positive

One of the cases where you can apply for credit is for the working capital of the company. Borrowing for this purpose is positive when the cost of financing the repayment term to the customer is offset by the margin that business brings, as well as the amount the prospect will have for the company in the medium and long term. Another reason is to keep the stock of raw materials or goods that will be delivered on time and that will allow the repayments of the loan taken.

Often, to reduce the company’s operating costs it is necessary to apply upfront capital, which in most cases is not available to the company. If you are confident about seizing opportunities such as increasing the efficiency of your organization’s machines, equipment, technologies, and infrastructure, looking for a loan may be a viable solution.

Possibility is to swap debt incurred in the past at higher interest rates 

Possibility is to swap debt incurred in the past at higher interest rates 

Another possibility is to swap debt incurred in the past at higher interest rates or products that are less suited to your business needs, for credit lines that are more appropriate to the company’s timing, either for its purpose or for its characteristics.

Finally, I think it is important to note that it is common for some entrepreneurs to make loans without regard to the activities and size of their companies. In that case, I have to give a warning – don’t make the same mistake! Before you sign any loan, research the terms offered and see if the interest rates are within what you can afford in the future. Good luck and good business!