Credit denial can be a major obstacle for the entrepreneur to obtain resources and invest in the growth of his business. Learn how to avoid this!
Credit is an important strategic tool for the company to continue investing in its growth. It prevents the company’s operations from slowing or even slowing down. But conquering this resource can be an arduous task. The refusal of credit is a barrier that haunts many entrepreneurs, who can see no way out before a non-financial institution.
It is important to remember that banks and financial institutions conduct a detailed analysis to approve or not the granting of credit. The criteria used by them range from evaluating the company’s net worth to the quantity and quality of customers.
Despite the restrictions imposed, the credit concessions in Brazil are at full throttle. According to the Central Bank , these operations exceed R $ 300 billion per month, attesting to the value of credit to foster economic growth in the country.
And to ensure your company’s sustainable growth, it’s critical that you fully understand what are the main barriers that can prevent your company from winning the long-awaited credit to undertake and so make the best business decisions. That’s what we’ll talk about in this post.
1. Do not reach the minimum grade to get the requested credit
- 2. Have restrictions that result in the refusal of credit
- 3. Not achieving the minimum necessary due to insufficient economic and financial results
- 4. Have low or inconsistent billing
- 5. Present incorrect or outdated information
1. Do not reach the minimum grade to get the requested credit
First, know that your company’s relationship with the credit market is being evaluated at all times. The result of this evaluation is called “credit score”, or “credit score”, a statistical analysis model that serves as a tool for financial institutions to grant the resource.
Among the main behaviors relevant to this evaluation are:
- payment habits;
- updating of cadastral data;
- history of negative debts;
- relationship with companies.
In summary, the higher your score, the lower the chances of you suffering from the credit refusal that could prevent you from receiving funds for investments .
There are several statistical models in the market for credit analysis , and one of the best known is the Serasa Score, which ranges from zero to 1,000 points. Those with a score above 700 points are considered as low default risk.
The company holding the statistical analysis does not define a court order, so to speak. It is up to financial institutions to establish a minimum score. If your business is below this amount, you will most likely have the credit declined.
2. Have restrictions that result in the refusal of credit
If the company is denied a credit protection agency – SPC or Serasa, for example – the credit denial is practically certain. This also applies to members since it is common for financial institutions to analyze the CPF of entrepreneurs seeking restrictions. It is understood that if a member has problems with their personal finances, this will likely spill over into the company’s finances.
The scenario here may be quite different depending on the bank or the financial institution. Although the Central Bank keeps track of defaulters for only two years, banks can keep copies and use these records as a basis for credit refusal, even if this is questionable.
In other cases, the company can pay off its debt at the financial institution and then get release for a new credit. Other problems that are restrictive here are usually related to:
- lack or disagreement in legal documentation, such as official records or licenses;
- company without a solid billing history;
- lack of quality of the customer portfolio.
3. Not achieving the minimum necessary due to insufficient economic and financial results
To grant the credit, the financial institution wants to have guarantees that your company will be able to honor with commitment. Here you enter one of the 5 Cs of credit analysis : the capacity, that is, the margin the business has to shoulder new debts.
Consideration should be given to the debt the company already owns, the maturity flow of its obligations, the profile of debts and everything else that could impact the ability to repay new credit.
4. Have low or inconsistent billing
It can happen that your company and its partners are even in the credit market, without debt or any other bureaucratic pendulum, but still, take a credit refusal. What could it be? The answer may be in billing.
If your business’s budget is tight, just enough to pay off your current debt, this can be a bad sign. After all, any financial prediction could jeopardize all the company’s operations.
For this reason, the history of entries and exits and the tax returns are very requested records in credit analyzes. The objective is to assess whether your cash flow still has enough margin to accommodate a new obligation. Other documents that may be requested include:
- analytical and equity balance sheet;
- social contract;
- Integrated Declaration of Economic and Fiscal Information of the Legal Entity – DIPJ;
- year-to-date monthly billing;
- evaluation of a third audit;
- if the idea is to open a business or expand its operations, it will be necessary to present a business plan;
5. Present incorrect or outdated information
Maybe credit denial has a simpler reason. As we have seen, the financial institutions analyze a series of information to grant the credit or not. If the data passed on is incorrect or outdated, there may be problems. So be aware of the registration, correctly informing all the data and making sure they are up to date.
It is clear that each financial institution or bank will define its own policies to evaluate the granting of credits. Even factors related to the country’s economy may interfere with the opening of credit in the market – in periods of instability and recession, the rules may even become more rigid.
But it is up to the entrepreneur to always watch over his cash flow to maintain a stable and promising financial situation, reducing to the maximum the chances of having the credit denied.
It is fundamental that the entrepreneur keeps his documentation up to date and develops a good relationship in the market. In this way, you will avoid refusing credit and will always keep the doors open for resources in order to ensure sustainable growth for your business.