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Credit Access Center provides guidance on applying for credit while in debt, prioritizing debt and resource management tips.
If finding yourself in debt is a reality in your life, know that you are not alone. Many people experience debt situations, whether for personal or business reasons. It is important to look for ways to reorganize your finances and seek professional help if necessary, to get rid of of this situation.
It is essential to understand that being in debt does not necessarily mean being in default. There are strategies and alternatives for debtors who are going through this situation. Don't despair, seek guidance and take the first step to get out of this situation.
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The situation of indebted companies is characterized when debts exceed the payment capacity due to lack of resources and entrepreneurs are unable to meet financial obligations. This condition can be caused by a number of factors, such as excessive debt, poor operational performance, management problems, economic impacts adverse events or changes in the market.
'Although the word sounds bad, debt can be a strategic tool to leverage the growth and development of companies when used in a conscious and planned manner, but it is essential that companies carefully assess the associated costs and risks, as well as their ability to generate returns on investments made', explained the analyst at Credit Access Center (NAC) from Minas Gerais, Thiago de Assis Gonzaga.
In this month's NAC Responde, the specialist answers questions about the types of debt, what to pay first, whether it is possible to apply for credit while in debt, among other questions. Check out:
'Main types of debt'
Debt can be classified as sustainable or unsustainable.
- Sustainable debt is a company's ability to manage debts in a responsible and balanced way, ensuring that debt levels do not compromise the ability to pay or invest in strategic projects. It involves maintaining a balance between the financial resources obtained through loans and the company's ability to honor these commitments, whether in the short, medium or long term.
- Unsustainable debt occurs when debts exceed the payment capacity and negatively impacts the company's financial health and credibility in the market, limiting the capacity for investment and growth.
Debt can be a strategic tool to leverage the growth and development of companies when used in a conscious and planned manner, enabling investments in expansion, innovation and modernization, contributing to competitiveness and solidity in the market. However, it is essential that companies carefully assess the associated costs and risks, as well as their ability to produce a return on investments made, in order to ensure that debt effectively contributes to strengthening the business.
'How to get out of a debt situation'
It is crucial to take a strategic approach. Start by paying off debts with higher interest rates, followed by short-term debts like bank loans and late bills due to the immediate impact on your financial health. Also consider medium and long-term debts in the strategy, considering not only the value, but the immediate and long-term financial impact.
'Obtaining credit while in debt'
Yes, it is possible to seek credit, however, approval for this is subject to a careful analysis by the Financial Institution.
If the company presents a robust plan to pay off existing debts and demonstrates payment capacity, some institutions may consider granting new credit, although obtaining loans in debt situations is often marked by the challenge of costs – interest rates – more high due to the associated risk of default.
'Credit lines to resolve debt'
Yes, there are lines, programs and types of credit that can help companies settle debts with more favorable conditions, such as lower interest rates and more flexible payment terms, as shown in some examples below.
- National Support Program for Micro and Small Businesses (Pronampe): created to offer credit to micro and small businesses with advantageous conditions, such as reduced interest rates and longer payment terms.
- Advance of receivables: type of credit offered by the financial system that consists of advancing the period for receipt of the sale of products and services.
- Renegotiation: allows the extension of the contract installments, whether or not the interest rate may be changed.
- Refinancing: consists of a new credit operation replacing an open contract, where new credit conditions will be established.
- Loans secured by property or vehicle: in this type of credit operation, the asset is sold and the borrower receives a percentage of the value of the asset.
- Portability: this is the migration of a credit operation from one financial institution to another, under more favorable conditions.
There are several credit line options available, and therefore we suggest that business owners contact the credit agent at the bank they use, as they will be able to advise on the most appropriate solution.
'Recommendations to avoid debt'
The main tips from the Credit Access Center specialist are:
- Avoid as much as possible that the company and partners with high debts go into default and thus be included in the credit protection registers. Any registration notes restrict companies' credit in the financial system, as well as causing suppliers to stop offering payment terms for raw materials.
- Maintain strict control of finances, tracking income, expenses and cash flow.
- Develop a solid business plan with realistic financial goals.
- Analyze business risk to be prepared to face unforeseen events.
- If the company is already in debt, negotiate with creditors to restructure payments or seek more favorable conditions.
- Make investments based on solid analysis, avoid hasty decisions.
- Conduct periodic reviews of financial performance and adjust strategies as necessary.
- Do not mix the company's accounts with those of the partners. The company has its own commitments to suppliers, customers, legal obligations and payment of employees and partners' pro-labore. The expenses of partners and family members must be met with legal withdrawals, otherwise the company's financial health will be compromised.
- Production costs and product sales prices must be adequate for the company to maintain its profit margin and ensure its vigor.
- In the case of high debt, it is necessary to take strict measures to keep the company active, such as reducing the size of the business, cutting superfluous consumption, selling obsolete stocks and, if necessary, cutting staff.
- Make sure that creditors understand that the debt is circumstantial and that the company is taking measures to overcome the debt.
'NAC Responds: clarify your doubts about credit'
Every month, NAC Responde, produced by Industry News Agency, answers the most frequently asked questions from business owners and managers when seeking credit for their business.
'Through the guidelines, NAC facilitates access to credit for micro, small and medium-sized industrial companies. Credit is essential for the functioning of companies, whether to facilitate new investments or to meet routine cash needs', points out the CNI's Economic Policy manager, Fábio Guerra.
Since 2015, the NAC, from National Confederation of Industry (CNI), advises industrial MSEs on the credit lines available on the market, providing support with information on documentation, interest rates, guarantees, number of installments, financeable items, among others.
Find out more on the website Credit Access Center (NAC) or contact your state's industry federation.
Source: Industry Portal
