Learn how to make good use of credit lines for SMEs

The novel coronavirus pandemic has changed economic relations worldwide. So, it's natural that the demand for loans is growing, but before you apply for one, you need to thoroughly understand the credit lines available and the best option for your business.

A series of measures focused on credit for micro and small businesses have been announced since the beginning of the novel coronavirus crisis, as a way to give breathing space to small businesses that are being directly impacted by social isolation.

One of these measures is the National Support Program for Micro and Small Businesses (Pronampe), created by the Federal Government, aimed at micro-enterprises with revenues of up to R$$ 360 thousand per year; small businesses with annual revenues of R$$ 360 thousand to R$$ 4.8 million; and new companies, with less than one year of operation.

However, in the latter case, the loan limit will be up to half of the share capital or 30% of the average monthly revenue. Learn more here.

Another measure to help SMEs is being carried out by Sebrae (Brazilian Support Service for Micro and Small Enterprises), which since the beginning of the measures announced by the authorities, has been monitoring the news and actions of Financial Institutions throughout Brazil to provide small business owners with qualified and useful information to face the effects of the crisis with the paralysis of activities.

The collection, which describes the main lines of credit announced to date, is updated periodically and can be found at: Financial institutions’ credit lines (in PDF) – Updated on 08/07/2020.

Below, we've put together some tips for you when using a line of credit. Check them out:

1.   Use wisely: Lines of credit should be used as a safety net when you need immediate cash to cover an unexpected expense. For other purposes, it's best to have proper financial planning to avoid paying interest.
2.   Manage interest costs: Consult different institutions and banks and see which one offers the best interest rates. Also, remember that the longer the term, the more interest you'll pay. Therefore, understand your needs and your financial capacity.
3.   Keep in mind that these transactions involve interest, sometimes high interest rates. So, if you can't pay your installments on time, this can snowball into a real problem.