Debt financing: definition, types, advantages and disadvantages

Definition: what is debt financing?

Definition: what is debt financing?

Debt financing is financing through debt capital. A lender leaves money to a company for a limited period of time. The company undertakes to pay interest on this sum and to repay the amount on a previously agreed date. Debt financing is usually used for investments or to meet a company’s short-term liquidity needs.

What is the difference between self-financing and debt financing?

In contrast to self-financing, the lender of external financing is not liable for the company’s activities. Depending on the legal form of the company, equity investors are fully liable with their assets, only in part or in a limited form in the amount of their contribution. In the event of bankruptcy, the lender of a debt financing is entitled to the repayment of his loan before other capital providers or the owners themselves. In contrast to equity providers, lenders do not participate in a company’s profit and loss.

While debt remains in the company for a limited period of time, equity usually remains long-term. The equity capital received does not have to be repaid.

In contrast to equity investors, lenders have no say in corporate decisions.

What types of debt financing are there?

What types of debt financing are there?

A basic distinction is made between short-term and medium to long-term forms of debt financing. There are also special forms – so-called loan substitutes – that are used for financing instead of a normal loan. And last but not least, there are mixed forms between equity and debt financing. Below we show you examples of debt financing.

  • Short-term debt: trade loans

    Commercial loans include customer loans, which come about, for example, through down payments or partial payments, but also supplier loans that arise when suppliers e.g. B. Grant generous payment terms.

  • Short-term bank loans for debt financing

    Short-term bank loans include overdrafts, so-called overdrafts or overdrafts.

    There are also bills of exchange. This means that a loan is secured by a bill of exchange. A bill of exchange is a security that instructs the issuer to transfer money to the recipient of the bill of exchange. Bills of exchange are rarely used today because they are very complex to handle.

    The Lombard loan is also a short-term bank loan: It is a loan that is secured by pledging securities, bank deposits or movable property.

  • Short-term debt financing: credit bonds

    Loans: With loans, banks do not provide money, only their creditworthiness. There are two types of credit bonds:

    • Acceptance credit: With an acceptance credit, a bank accepts bills of exchange issued by the customer. The credit institution is then obliged to honor the bill of exchange with a third party who has the acceptance. Again, the obligation is independent of whether the borrower is covering the bill.
    • Guarantee credit: In the case of guarantee credit, a credit institution guarantees against certain liabilities for a fee.
  • Medium to long-term debt financing: promissory note loans

    Promissory note loans are only granted to borrowers with very good credit ratings. The loan is similar to a bond – however, the promissory notes are not traded on the stock exchange, but are typically transferred from credit institutions to large investors such as insurance companies, pension funds or social insurance institutions.

  • Medium to long-term debt financing: bonds

    A bond is a security that grants the creditor the right to repay and to pay agreed interest.

  • Medium to long-term debt financing: employee participation

    The idea behind employee participation is as follows: First, employees put their capital into the company in which they work. Later they will be involved in the financial success. Ideally, employees feel much more connected to their employer and are more motivated to do their best. If you as an entrepreneur want to involve your employees, you can do this in the form of shares or company shares. This form of participation is still very rare in Germany. It already exists in many companies in the United States.

  • Medium to long-term debt financing: foreign trade loans

    Foreign trade credits are intended to finance foreign trade and are granted to importers and exporters. Lenders are credit institutions, in this case especially the Kreditanstalt für Wiederaufbau (KfW) and the Export Credit Company (AKA).

  • Long-term bank loans for debt financing

    This means company loans that have a term of at least 4-5 years.

  • Special form of external financing: leasing

    Companies traditionally use leasing to use vehicles or technical equipment for monthly installments. This is often cheaper than buying the property yourself. Leasing also makes sense in other contexts. For example, companies can lease their own real estate. This process is called sale-and-lease-back. The company sells its properties to a leasing company and then leases them back. On the one hand, entrepreneurs can save taxes because leasing costs can be deducted from tax as operating expenses. On the other hand, companies can significantly improve their liquidity in this way, since they do not have to tie up any capital in the property. This method also offers long-term planning security for the company, since the monthly charge is determined when the leasing contract is concluded.

  • Special form of external financing: factoring

    In factoring, a company sells an outstanding claim that it has against a customer to a factoring company before this claim becomes due. This way the company gets its money earlier. Of course, it also has to pay a certain percentage of the outstanding receivable to the factoring company and therefore does not receive the full amount that the customer owes the company.

  • Special form of debt financing: asset-backed securities

    Translated, this term means “asset-backed securities”. This means that rights from claims or other payment claims are represented in the form of tradable securities. In this way, companies refinance themselves via the capital market and obtain debt in the short term.

  • Mixed form between internal and external financing: mezzanine

    Mezzanine capital is a mixture of equity and debt, because equity is added to a company from the balance sheet, but the lenders are not granted voting rights or any other form of influence. Mezzanine capital, for example in the form of profit participation rights or silent participations, is considered to be similar to equity. However, it can also be granted in the form of subordinated loans or shareholder loans and then has more of the character of outside capital. It must then also be recognized in the balance sheet as debt.

What are the advantages and disadvantages of debt financing?

What are the advantages and disadvantages of debt financing?

The debt financing options presented above have both advantages and disadvantages for companies.

Advantages of debt financing

  • Tax benefits: Since the company has to pay interest on the loan capital, it can record this as an expense. This in turn reduces the tax burden that the company has to pay.
  • Self-determination: Lenders have no say in corporate governance (the only exception – as described above – are certain forms of mezzanine capital)
  • No participation: Lenders are not involved in the company’s profit (but also not in the loss). You only get back the capital you invested, including interest.

The advantage of the leverage effect

If you wonder how leverage affects the return on equity, the leverage effect comes into play. It means that entrepreneurs can increase their return on equity by using debt instead of equity.

An example: An entrepreneur needs $ 200,000 to invest in a factory. It assumes that it will generate a return of 10% per year with this factory in the future. She pays $ 100,000 from her equity. The other $ 100,000 is borrowed from the bank at an interest rate of 5%. The entrepreneur’s plan works and she actually generates a 10% return per year (i.e. $ 20,000). Your return on equity is 20%.

Because: return on equity = profit: used equity

20,000: 100,000 = 0.20 (this corresponds to 20%)

If the entrepreneur had financed the entire investment of $ 200,000 from her equity, her return on equity would only be 10%.

Because: 20,000: 200,000 = 0.10 (this corresponds to 10%)

The leverage effect shows why debt financing can be cheaper than self-financing. The use of outside capital “leverages” the entrepreneur’s return on equity upwards. That sounds good – and it is. However, the leverage effect cannot be used for an unlimited number of investments at the same time, because

  • Entrepreneurs cannot take out an unlimited number of loans
  • the more loans entrepreneurs take out, the higher the interest they have to pay. As a result, the leverage effect turns negative: The interest on the loans becomes so high that it consumes the return on equity or is even higher than the return on equity.

Disadvantages of debt financing

  • Interest costs: Depending on the creditworthiness of the company and the current market situation, the interest payments for the borrowed capital may be high.
  • Risks: If a company borrows from multiple sources, it must also pay interest and repayments to several lenders. If the managing directors overestimate the economic situation of their company, or if the business slumps for any reason, this can lead to payment bottlenecks and one or more donors can no longer be served. This in turn can lead to overindebtedness.
  • Time pressure: Companies agree on a fixed point in time with the lender at which the lender gets their capital back. Depending on the economic situation the company is in at the time, this money may be missing.

When does it make sense to use external financing – and when does self-financing?

Both types of financing have their advantages and disadvantages. A general answer to this question is also difficult because the decision depends, among other things, on the following criteria:

  • How big is the company?
  • What is the corporate structure like?
  • What industry is the company in?

Basically, it is always a matter of finding the right ratio between debt financing and self-financing for every company.

At the beginning, entrepreneurs should answer the following questions for themselves before deciding on a variant:

  • Do I want to lower my tax burden? In this case, it can make sense to borrow part of the money – for an investment, for example – through external financing. In this way, the outside capital helps to minimize the tax burden.
  • Do I want to provide my company with long-term, solid capital? In this case, entrepreneurs should focus as much as possible on equity financing. In contrast to lenders, equity investors usually have a greater interest in the company remaining in the long term.

How do I approach the ideal amount of my debt financing?

If debt financing is fundamentally possible, the above formula for the leverage effect (return on equity = profit: equity invested) helps when deciding on the amount.

By using different amounts of equity in the formula, you can quickly find out which ratio of equity to debt is reasonable. Your bank will then help you with the exact calculation. Also, find out about the interest you would pay under the debt financing model you chose and make sure that this interest does not erode the return on equity.

What does internal financing mean and what is external financing?

The terms internal and external financing often appear in connection with the topic of external financing.

Internal financing: Internal financing is financing through funds that are already in the operational cycle.

External financing: External financing, on the other hand, is financing through funds provided by external capital providers.

In which cases does external financing not count as external financing?

The term external finance is often equated with the term external finance, although the two terms do not always match. Fundamentally, external financing is funds that are provided by external capital providers and not from the proceeds of the company itself.

Classic examples of debt financing that do not count as external financing are the following:

  • Provisions on a company’s balance sheet. The reason why provisions are shown as external financing in the balance sheet can be explained as follows: They represent possible claims “from outside” on the company. At the same time, however, they are instruments of internal financing because they can be traced back to internal reasons. In other words, provisions are external financing that is not external financing at the same time.
  • Financing from depreciation. Depreciation is also considered to be outside financing, although no external capital is added.
  • Financing through rationalization or restructuring. Rationalizations or restructurings are also shown in the balance sheet as debt capital, although their origin can be traced back to internal processes.

How can start-ups be supported by external financing?

Start-ups in particular often have little equity and often find it difficult to obtain common external financing – such as bank loans. Credit institutions often do not trust them enough. As a start-up aid, there are therefore special programs for business start-ups, such as grants, low-interest start-up loans, but also guarantees or participations.

However, many of these programs are not used as actively as the initiators thought. Founders complain that the application is often very bureaucratic and therefore they shy away from such offers. In addition, due to the very different programs that exist in this regard, it is often difficult to get an overview of all the options.

Easy Loan Sites

Do You Know What’s Going On With These Sites?

Do You Know What

The easy loan site is a very nice idea and I do think it could work. The problem with this type of lending site is the cost associated with them.

 

Most are far too expensive to be really profitable. Many sites that seem great simply don’t work at all. In fact, some of these sites have a high overhead cost and will cause their costs to rise in the long run.

 

They aren’t just a website though. These sites have a lot of costs to pay and even if they can make a profit, the profit isn’t large enough to cover the costs.

Companies offer these services

Companies offer these services

Not many of the companies that offer these services advertise their “exclusivity” for only a short period of time. Once this period is over, their website suddenly goes out of business.

 

So, how does this site get off the ground? Many sites require a small up front fee for their service and then earn a substantial profit from affiliate marketing.

 

There is still plenty of time for the site to prove its success before a more expensive level of membership is required. Then again, a well established company could afford to be a little more expensive.

 

I’ve noticed that many of these sites seem to grow quickly and rapidly, then collapse quickly after that. You know the kind of thing.

 

It’s possible that this is just an accident of nature in this sort of “spiral” that I’m discussing. I’ve seen other things similar happen before.

 

But, even the bigger sites, the ones that were extremely successful earlier in their life seem to disappear after that. If there is no viable plan on their part to keep their business going, why would they do this?

 

Even though this could be due to nothing else, it seems a good reason to check out the easy loan site before you commit to anything. If they are able to keep their business running despite this low cost membership, it would stand to reason that other sites could do the same.

 

These types of sites are not that much more expensive than the sites that give you an annual membership or a short term one. In fact, it may be a little easier to join than other sites in the long run.

Final note

money note

So, if you haven’t already visited the different companies online, try one of these, too. Whether it be from this easy loan site or another company, the entire point of being online is to save money and earn it back at the same time.

Consolidating Your Credit Card Debts

Pros and Cons of Consolidating Your Credit Card Debts

Debt consolidation is a process of turning debt into one low monthly payment. This is a highly beneficial technique for people who have lots of debt, but are unable to pay off all their outstanding debts as they are just not able to make ends meet.

Several ways to consolidate debt

Several ways to consolidate debt

It can be done through debt settlement, debt consolidation loan or a debt consolidation company. Each has its own advantages and disadvantages.

Debt settlement is the process of negotiating with your creditors for a lower amount to be paid back. Your creditors will accept a lower amount if you can prove that you can’t pay it back. In this case, your creditors may agree to lower your debt by reducing it to a level that is less than your total outstanding balance. After this, you make a single monthly payment to the debt consolidation company.

If you want to consolidate debt yourself, you can apply for a debt consolidation loan. This is a loan that you can use to cover your monthly debt payments. If you need to apply for a debt consolidation loan, get a consolidation loan quote from a few different lenders to find the one that best suits your needs.

Consolidate debt by using a debt consolidation company

Consolidate debt by using a debt consolidation company

The debt company will be in charge of handling all your accounts. They will negotiate with your creditors and send your payments to the debt consolidation company.

Once your payments are sent to the debt consolidation company, the debt company pays your creditors and if all goes well, you will be debt free. If there are still any outstanding balances left after paying the debt consolidation company, you must pay these balances on your own.

You will have to pay interest on the debt consolidation company’s fees. That is why it is essential to go through debt consolidation companies carefully to avoid the pitfalls that can happen when taking the first company that offers you a low price for a high price.

Don’t forget that you should consult with a lawyer before you decide to use a debt consolidation firm. They will be in charge of finding you the best company that can handle your needs.

Choose the right debt consolidation agency

Choose the right debt consolidation agency

Before you choose the right debt consolidation agency, do some research. There are many companies out there that promise you everything but deliver nothing. Before you give in to these companies, you need to know that there are many reputable debt management companies out there.

Get at least 3 free quotes. Call as many of them as you can. You should not settle for the first offer you receive.

The main purpose of a debt consolidation agency is to negotiate your credit card debt so that you can become debt free. If you plan to use a debt consolidation company to pay off your debts on your own, you should first go through a debt management program and seek counseling. After you have cleared up your debt and put an end to your financial worries, do not forget to follow up with your counselor to keep track of your progress.

If you feel that your credit card debts are too large and unmanageable, then you should contact a debt management company and inquire about their services. You can also learn more by visiting the links below.

Where to get a loan before salary?

 

In a world where unmanned vehicles and flights to space are becoming commonplace, getting money online will not surprise anyone. Now you can get rid of the cash deficit in a matter of minutes, without visits by bank branches. The client does not have to collect packages of documents confirming his solvency. Financial companies make decisions on loan applications based on the passport and personal data of the borrower, as well as information taken from the Bureau of credit histories. The process of lending on the Internet takes a minimum of time and effort.

Why are loans without references safe?

Why are loans without references safe?

Many of our citizens doubt the reliability of online credit services, believing that they have not yet sufficiently established themselves in the financial market as banks, which means they cannot arouse public confidence. Such borrowers are used to using proven, old tools, rather than succumbing to the unknown, the “new”.

However, the pay day loan segment, or “loans for the day”, has existed on the domestic market for more than five years, having come to us from Europe and the USA. The popularity of microcredit services is growing every day. Who understands the principle of microfinance organizations (MFIs), boldly enjoys all their advantages and advantages.

The main goal of “payday loans” is to solve the financial issue of the user with minimal actions on his part. MFIs do not need certificates and other money back guarantees. Enough credit history, passport, financial and other data left by the borrower in the questionnaire upon initial application.

What is needed to apply for a loan online?

What is needed to apply for a loan online?

To receive money via the Internet, you need to take several steps:

– choose a credit service;

– register on the site (the process takes from 5 to 20 minutes);

– apply for review (up to 2-15 minutes);

– if yes, read the electronic version of the loan agreement and agree to its terms;

Money is credited to a bank card usually from several minutes to several days, depending on the card issuing banks.

In different financial institutions, the time for obtaining a loan and the procedure may vary, but in general the scheme is the same:

  • Filling in the questionnaire (registration in the system).
  • Awaiting decision.
  • Approval of the application.
  • Crediting money to the card.

Where can I get loans to paychecks in 15 minutes?

Where can I get loans to paychecks in 15 minutes?

Our company is a financial company in which users take loans at standard interest rates per day, without visits to offices, certificates and overpayments. Making the first loan on the website will take about 20 minutes, the daily rate is 0.01% of the amount.

If you still think in which organization it is profitable to take a loan for a life up to a salary, go to the page and make sure the right choice is now!

5 Tips for Getting a Low Interest Loan

The loan is one of the oldest businesses in the world. There will always be people in need of extra money and people willing to lend. When you borrow money, the amount you can use yourself is called equity.

Interest rate is the percentage of the capital charged by the creditor

cash

The interest rate is the percentage of the capital charged by the creditor for using that money. When you, for example, apply for a credit card, banks calculate credit card interest.

This can also happen the other way around – for example, banks can pay you interest on a certificate of deposit, so they are basically borrowing money from you.

Of course, banks always charge more in interest than they pay for bank certificates of deposit, since otherwise, they would not profit. The most common loans that banks offer that most people take in their lifetime are financing.

Interest rates and how lenders calculate loan installments

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Interest rates and how lenders calculate loan installments can depend on several aspects. If the creditor thinks there is a reason to doubt that the debt will be paid, the fee will be higher.

When banks calculate, they also take into account the person’s age. Another aspect that affects the rate is credit history. If it is bad or has questionable items, the interest rate will be considerably higher. This goes for credit card interest rates, for example. This is done to protect the lender from non-profit loans.

There are also those fixed interest rates – most financing loans, for example. In such cases, you will pay the interest first. But, of course, to calculate the credit for the investment and the loan installments there are other aspects that also weigh. Over time, the percentage of the real debt will increase in payments, while the weight of interest will decrease.

Although interest rates are almost always non-negotiable, there are ways to reduce interest on loans and financing loans as well. Let’s see how this can be done and how to calculate loans in the best possible way.

1. Settle debts with your savings

  Yes, this may seem crazy at first – why should you touch your savings? Aren’t they there to prevent you from taking out a new loan if something unexpected happens? If you do the math you will realize that you will save money by doing this. Just make sure that your prepayment charges are no greater than your total interest sum. If they aren’t, you can avoid paying interest and save that money in the long run, even though it doesn’t seem like it. You are not just “seeing” the money, but know that you have saved.

2. Consider changing providers

Loan providers, and especially finance loans, operate in a highly competitive market. They change their interest rate and calculate loan installments daily to react to changes demanded by the market. Keep an eye open for these changes. You can get better interest elsewhere. If you see a chance, you can take a new loan at a lower interest rate and pay off the existing one. But again, – check for prepayment fees and, if any, if they are small enough to make the exchange worthwhile.

3. Pay capital faster

When you make extra payments, they will generally meet the principal amount of your debt. The prepayment fee is usually only charged when you pay the entire amount. Consider paying small amounts that reduce the principal over time. The interest rate is directly linked to the amount you owe. When the amount is reduced, interest is also reduced. In addition, you will shorten the loan repayment period, which also means a lower sum of total interest in the long run. This is especially true when you calculate financing credit, as they are usually taken out over a long period of time. Remember that, in the early years of financing, you are mainly paying interest on financing.

4. Consider spending more to spend less

Say you need a car and don’t want to spend a lot. The first idea would be to buy an old car, as cheap as possible. This, in fact, can cost you more than buying a new one. Interest rates are considerably higher for products or properties of questionable value or with a high risk of breaking – when companies calculate loans, they always take into account the asset being purchased. What may seem cheap will have an unexpected hidden cost – these are financing interest.

Not to mention the possibility that you need to fix old things, which probably won’t happen with new ones. So, when buying something, never accept the face value, always calculate the loans and think carefully if what you are paying is really what you get or just a fee to reduce someone else’s risk.

5. Check your credit history and do your homework

You can affect the interest that will be offered by keeping your credit history in order. Before applying for a loan, try to pay off many smaller debts that already exist. Also, check that you have no payment slips that you forgot to pay or that your credit cards are not stretched to the maximum.

The most important detail that people tend to forget is to do their homework. Search, search, search. As we mentioned, this is a competitive market and there are many offers out there.

See also what’s going on with the market itself. When you want to buy a house, it is an important decision – financing can be very different depending on the provider. Wait and buy when fixed interest rates are generally low and real estate is cheaper. Don’t be in a hurry to end up buying when everyone else is buying. Have tactics and be patient. It will be worth it in the long run.

Who offers the best interest rates?

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  If you need immediate financial help, Sean Cole is a company you can trust. We work with the most reputable creditors in the market, and we always check that your interest rates are competitive. You can conveniently customize the payment period and amount according to your needs.

Applying for a loan with Sean Cole couldn’t be easier. Simply provide some personal details, wait for the offers and choose the most suitable for you.

Credit can help financial control for small businesses

Small businesses often deal with challenges on a daily basis. Tight budgets and limited resources are just a few of them. And, in the absence of financial resources at the cash register, many small business entrepreneurs end up resorting to business credit, a way to finance operational activities and ease the bills. And how can business credit help a business? Keep an eye on today’s post and check out the importance of having financial control for small businesses. Follow:

 

Innovate products and services

credit loan

In order to remain competitive and active in the market, small companies must seek the innovation of products/services continuously. After all, it is sales that make money enter the cash register. available? positive, looking for a business credit alternative ends up being quite advantageous. The best rates can be found at the BNDES, but with good research and evaluation? It is possible to find interesting proposals in commercial banks. The tip? search, search and search. In addition to interest. It is always important to compare rates, taxes and payment terms between institutions. Many companies end up going into “a real bottomless hole” by resorting to third party capital without the value of the installment falling into the budget. Here’s the tip!

 

Obtain working capital

credit loan

Working capital? the resource used to pay the company’s recurring expenses, those that are operational and that are directly related to its operation, such as salaries and stock replacement. In the absence of resources to maintain routine tasks, the entrepreneur starts to see himself in a real pool, and serious financial problems begin to happen, such as delays from suppliers, lack of money to buy materials raw materials, wages and other essential obligations to keep the company active and competitive. Seeking credit for working capital ends up being the most appropriate option. The big advantage in this situation? that the credit offered for investments ends up being less bureaucratic and with more attractive rates. However, before you go out looking for money to cover expenses, ? you need to put the accounts on the tip of the pencil and negotiate with the bank where the company already has an open account. How does the manager already? knows the movement and history of the company, it can be easier to negotiate and find a solution that fits the budget of the company, without harming it further or even taking it to more doubts.

 

Investing in accounting and financial management software

Financial credit is not used only when the company is in red or want to catch up. It is necessary to look at it as something that can bring benefits to the operational processes and help in more efficient accounting and financial management. For an enterprise to really achieve good results and be competitive, It is essential to have control over all financial operations. When adopting management software. It is possible to integrate information from all sectors of the company, offering greater control and monitoring over all processes. For example, a cash flow integrated with the stock and the purchasing sector. Allows the manager to have control of what is? leaving and entering. In the absence of cash resources, it may launch a promotion to fill this deficiency. Only, do you have more tips on financial control for small businesses. Share with us here in the comments.

Credit Payment: All Information (Tips and Tricks)

 When buying a good or service, two payment options are possible: cash or credit. In this article we will go over the different ways to pay on credit.

Free credit :

Free credit :

It is an ease of payment that many retailers, furniture stores, hi-fi and others commonly offer you.

Benefits :

  • This allows you to amortize your purchase over several months (usually between 2 and 6 months).
  • It is a free service, (in principle no administrative fees or interest).

Disadvantages :

  • You will notice that you will be asked to fill out several forms and that you will be asked for supporting documents ( RIB, proof of address, crossed check, photocopy of identity document, etc.). This seems normal (you don’t let a customer leave with an item without paying and without verifying their identity).
  • Only this often hides the subscription to contracts of which the seller does not give you the name clearly.
  • You can therefore subscribe (without knowing it or not really paying attention to it) to a loyalty card. This is often also a payment card which will later allow you to pay for deferred debit or credit items.
  • Even a card allowing you to take out revolving credits (also called “revolving credits”). If you have another funding option. We advise you to avoid this type of credit.

ADVICE :

  • Before signing the documents ask the seller if the payment in X times free of charge that he offers you is accompanied by a loyalty card. And if necessary if it is coupled with revolving credit. if so ask him the cost of this card at subscription and also the annual cost of this one.
  • Also be aware that some sellers do not really know in detail the credit they offer, (they are trained on the job).
  • Some others (fortunately they are rare), are unscrupulous and are ready to tell you anything for fear of “missing a sale”.
  • This is why it is essential to read before signing. (which we don’t usually do when faced with a sympathetic seller and in the euphoria of buying).

Classic credit :

Classic credit :

Again two possibilities:

1st possibility : It is offered on site by the seller. In this case it is from a credit company that you will borrow (indeed, whether it is for the purchase of a vehicle, a television set or a sofa), the credits offered on site in the store are those companies specializing in consumer credit.

Benefits :

  • Unlocking is often quite quick, especially since the store is a partner of the brand and they are used to working together.
  • It’s practical, you do everything on site. (purchase and credit).

Disadvantages :

  • You don’t make competition for credit work.

PLEASE NOTE : Before signing, make sure that this is a classic “consumer” credit, and not a revolving, revolving or revolving credit. These three terms mean the same thing: A loan with a very very high rate (sometimes bordering on 20%!). If so, apply for consumer credit. or even better, see your banker and come back later.

2nd possibility :   You postpone your purchase and contact your banker so that he can grant you consumer credit. Once the credit is released, you proceed to payment for the item in store.

TIP : To avoid being trapped during the purchase, be careful:

TIP : To avoid being trapped during the purchase, be careful:

  • First shop to compare prices.
  • Then when you have a clear idea of ​​the expected cost of the purchase, go to online credit sites (those whose names we mentioned above). Some people may make promotions valid for a few weeks. Then do online loan simulations.
  • Then contact your banker, by email or by phone, he can quickly give you an answer.
  • Compare the different proposals.
  • So, when you are facing the seller, you will have all the elements in hand to judge if his proposal is interesting.

And remember that you NEVER do good business in a rush!

5 benefits when applying for a credit

Fintechs, companies and startups that provide credit to individuals and companies along the lines that were previously restricted to brokers and banks, continue to grow in Brazil. Therefore, it is important to know the benefits when applying for a credit with a fintech, in a simple and unbureaucratic way.

According to a study by the Fintech Mining Report in 2019, the country has 550 such institutions.

In this way, the possibilities for companies and people looking for a new loan format are opened. And, this is what we will discuss in this article, pointing out the 5 benefits when applying for a credit with a fintech. Come on?

1. Less bureaucracy – more agility

1. Less bureaucracy - more agility

Bureaucracy is a recurring problem in Brazil. Fortunately, fintechs allow access to credit to be made more bureaucratic than in banks and brokerage firms.

Some offer the possibility of hiring via online; others, such as private payroll loans in partnership with companies, make the process even more agile. Want to avoid bureaucracy? Fintechs bring this great benefit.

2. Best rates on the market

Another point that fintechs swim against the current of traditional financial institutions is the fees. Many of them offer lower interest rates, which are described at the time of hiring.

Forget those lowercase letters in your bank’s contract: a fintech is clear on the document and lets you know exactly what the interest rate is – which, as said, can be the best on the market, without the need to always keep your account active.

3. Various forms of credit

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Different fintechs have particularities and varied forms of credit. This increases access to loans from individuals and companies, according to the need and type of contract.

Whether personal, business, private payroll loans, these institutions have extensive know-how in the services they serve. Still, it is worth noting: it is possible to have several forms of credit in just one fintech, which opens up the possibilities and streamlines the process.

4. Fintechs are democratic

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Another unique benefit of fintechs: they are democratic. Banks and brokers have restrictions on several people who are not approved on the “cut line” of the profile analysis. Fintechs, in general, have a more comprehensive and flexible credit policy.

 

5. Are digital platforms

5. Are digital platforms

Perhaps what most makes fintechs grow in the credit market is the ease of being based in a digital environment. For those who do not have time or want to do it in the comfort of home or work, it becomes much easier.

Companies are also benefited: no more time is wasted with bank meetings for financing and payment of the various guides. With a digital device, be it smartphone, notebook, tablet or computer, you benefit from having a quick credit in the palm of your hand.

Knowing the 5 benefits when applying for a credit with a fintech, how about having it all in your company? Register on our website and contact us to know our service platform.

Time limits for the right of withdrawal for a consumer credit.

If there is one area in which the consumer is helpless in the face of the legal and technical terms used, it is credit. In general, the home pages of the websites of banks or credit companies are user-friendly and understandable. But if you consult the general conditions, you switch to another world. And, unless you have solid legal notions, you are likely to understand nothing.

Everyone knows that in terms of credit, withdrawal periods are provided, this in order to protect the consumer.

But do you know the duration of these delays, and do you know how they are calculated ?

Explanation of the withdrawal period for consumer credit :

Explanation of the withdrawal period for consumer credit :

 These credits are governed by the consumer code. Article 311-12 of this code stipulates that a borrower can retract without having to justify himself, within 14 calendar days.

  • This 14-day period runs from the day of acceptance of the credit contract offer.
  • This offer must mention various mandatory information and must include a detachable form allowing you to withdraw.
  • Useful clarification : We have just seen that the consumer code provides for a withdrawal period of 14 calendar days, but what is a calendar day?
  • Answer : To be more precise, these are 14 completed calendar days. Thus, if you sign on May 3, the withdrawal period runs until May 17. May 18 it will be too late!

Regarding revolving credits :

Regarding revolving credits :

Revolving, replenishing credits or credit reserves, although different from the credits allocated are considered to be consumer credits. Therefore the rule is the same. Renewable credit contracts are subject to the 14 calendar day rule with regard to the withdrawal period.

How to retract ?

How to retract ?

  • We have seen above that the credit contract offer must include a detachable withdrawal form.
  • Simply complete this form, sign it, and send it to the specified address.
  • PLEASE NOTE: This letter must be sent by registered letter with acknowledgment of receipt.

The explanations given above only concern consumer loans (car / motorbike credit, work credit, personal loan, etc.). Home loans are subject to a different rule.

Aid, loans and financing for business creators!

The fight against unemployment goes of course through job creation in companies.

The fight against unemployment goes of course through job creation in companies.

New hiring incentives are regularly introduced. But there is another “sector” allowing to reduce the number of job seekers, it is the creation of company, indeed a person who creates his company it is one unemployed less, which itself is likely to ” hire from the start or over time.

When you want to start a business, the main difficulty lies in financing. We will review the different possibilities for raising the necessary funds.

1) Bank loans

The banks can of course grant you a loan but you should know that they will study your project from every angle. The bank also has an advisory role. They will be able to direct you to various organizations likely to help you and possibly grant you loans at low rates or even at zero rates.

2) ARCE

Attention: L’arce is not a loan, it is an aid, a subsidy as such it is not reimbursable.

Attention: L

The ARCE ( Aid for taking over or setting up a business ) is only paid to persons benefiting from the ARE (Aid for Return to Employment), that is to say paid job seekers.

  • ARCE is part of a larger system called ACRE ( Aid to the Unemployed Creating or Taking over a Business ). Clearly, this means that you must check whether your case falls within the criteria for admission to ACRE before applying to ARCE.
  • To obtain information on L’arce or to withdraw an application file, you must contact the Center de Formalité des Entreprises (CFE), its premises are located at the Chamber of Commerce and Industry.
  • It is therefore only after having confirmed that you are eligible for the Acre that you will be able to apply for an Arce loan from the employment center agency on which you depend.

What is the amount of the ARCE?

  • This aid is calculated as follows: 45% of the unemployment benefit amounts still to be collected.
  • It is paid in two installments, the first half as soon as the conditions for granting are met and the remaining 50% six months later.

3) NACRE

  • It is a zero rate loan repayable over a period of one to five years.
  • Mother-of-pearl is part of a more global approach integrating help, advice and support from the project phase to the three years of the business. (Aid and advice to finalize the assembly and project financing, then support for three years).
  • Are concerned: job seekers, RSA holders, employees who take over their businesses, etc.
  • The Nacre loan is only granted if your financing also includes a bank or similar loan.
  • The list of Nacre support operators can be viewed on the website
  • If the financing plan for your creation project is greater than 75,000 USD, you will not be able to claim the Nacre loan.

What is the amount of Mother of Pearl?

What is the amount of Mother of Pearl?

  • The ceiling for the Nacre credit is set at 8,000 USD.
  • It is repayable without interest by monthly installments which cannot be deferred.

4) Other structures that can grant loans or assistance

There are many structures of help and support for people wishing to create or take over a business, some even grant loans of honor, ie 0% credit. This is the case of :

  • Initiative France: It is an associative network of loans of honor without guarantee and without interest (Rate 0%).
  • Entrepreneurial network : You can find additional information on their website.
  • See also what local authorities and various administrations can offer you (Regional Council, General Council, community of municipalities, town hall, etc.).

A business creation requires long and difficult or even complex steps, the organizations mentioned above can be of great help, as much technical, strategic as financial. Do not hesitate to push the doors.

If your activity is suitable, why not start as a self-employed entrepreneur? Certain aids such as Acre or ARCE are compatible with the creation of a self-enterprise.