Usually entrepreneurs beginners assume that small business loans are similar to personal loans for individuals except that they are approved on behalf of a business with CNPJ. This is not correct. In fact, the structure of commercial loans is very different from the personal loan structure with CPF.
Entrepreneur Loan Beginner – How Does It Work?
Most retail and wholesale businesses require ongoing financial assistance, even if they are profitable and have everything in order, have to pay suppliers and if it grows, it will have to expand the company. That means budgets relating to debts and credit need to be implemented.
It can be challenging to address the real short- and long-term financing needs early in the life cycle of a business. So take control of everything that can be done to improve the business and look to the future always willing to get the credit needed to have working capital and maintain positive cash flow to handle the errand.
Differences between loan for entrepreneur and personal
Personal loans are granted based solely on credit, income and credit limit consultation; other few factors matter whether a person is financially stable or not at the time he or she applies for a loan.
Loans for entrepreneurs or commercials have different rules and considerations for approval. A lender tries to understand what a company’s chances of success are before distributing financial resources to a new start-up entrepreneur. This information is usually given through a business plan.
A business plan is not just a complete description of what the company will do. It should detail how the business will work and generate revenue, how the target audience research has been completed, have cost estimates to provide the products and services, marketing estimates and even financial modeling for the future.
Beginning entrepreneurs who are business owners who do not provide a detailed plan that shows a successful business model will rarely find good enough funding.
Government Loan for Entrepreneurs
The federal, state or local government does not distribute free money to any business. However, there are several options for government grants and even loan guarantees that can reduce the cost of financing a business.
Concessions tend to be easier to obtain because they have more specific requirements. Entrepreneurs can research microcredit, loan for innovation and business financing in their area.
In addition to Sebrae, BNDES and many other banks have specific programs. Can count on the National Program of Productive Microcredit Oriented (PNMPO) is aimed at microentrepreneurs. On the site of the entrepreneur’s bank you get more information.
When well managed, small businesses can secure loans for both beginner entrepreneurs and veteran entrepreneurs. Business owners looking for these types of loans will have to meet the basic requirements of each institution and modality of credit.
Loan with guarantee of personal property is risky
Some private lenders in particular will ask a borrower to place a personal property such as a home or a car in the agreement to ensure the approval of a commercial loan line. If the business fails, this asset will be leveraged by the lender to repay the prepaid loan. The results can be harmful.
Note: Separating personal and business resources can certainly avoid the risk of systemic losses. An entrepreneur can use a personal asset for a startup loan. However, once the company shows signs of becoming profitable, the business owner may substitute personal assets for a commercial asset for the secured loan.
In the more stable future, only assets and assets of companies should be used to give credit guarantees. Once a company establishes its own credit, the novice entrepreneur should no longer attach his name to commercial funding applications for borrowing opportunities.