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When is the right time to apply for a loan?

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Applying for a loan is an alternative that is presented to companies both to cure the debts acquired over time, to finance their working capital or to expand their activities.

Because it is a bureaucratic process and involves many associated costs, many entrepreneurs do not consider the feasibility of such an option and prefer to accumulate capital and then reinvest, which can result in the loss of several lucrative opportunities for your business.

So, we prepare this post to present when your company should apply for a loan and what factors should be taken into account before this request. In addition, a list of the basic documentation required for this process is presented. Check out!

What should you take into consideration before applying for a loan?

  • Analyze the reasons for applying for the loan
  • Check for other feasible solutions
  • Examine if you can repay the loan
  • Ponder if you have high debts that will accrue
  • Check the status of your working capital
  • Analyze if your company is innovative
  • Analyze if there are expansion opportunities
  • Simulate financial institutions
  • What are the documents required for taking credit?

What should you take into consideration before applying for a loan?

What should you take into consideration before applying for a loan?

Before applying for credit with a financial institution, it is important that you consider some factors to know if this is the best option for your business. Let’s look at some just below.

Analyze the reasons for applying for the loan

Analyze the reasons for applying for the loan

 

Many managers choose to take loans without analyzing the actual situation of their company, which can result in serious damage to their business. Often, when analyzing the financial indicators, the manager can find ways to cut costs and expenses, which may remove the need for credit.

Therefore, it is essential that you have a database structured and organized with the financial information of your enterprise, to know the real need of the credit application with the institutions of this type .

Check for other feasible solutions

 

The high interest rates charged by banks often make borrowing costs prohibitive, so applying for credit from these institutions is not always the best solution for paying off your debt.

Before resorting to this solution, make sure you have no alternatives, such as financial reserves, sale of goods, unnecessary spending cuts, etc.

If none of these solutions is feasible, apply for a loan to clear your debts or to finance your company’s activities.

Examine if you can repay the loan

Examine if you can repay the loan

 

Often times, in the face of difficulties, managers decide to take loans thinking of curing short-term debt and do not worry about analyzing whether the company will be able to pay this new debt.

So before using this solution, it is important that you analyze all the expenses of your business – such as wages, payment of suppliers, costs with materials and supplies, etc. – added to the cost of the installments of the loans. This way you will correctly evaluate your real ability to pay.

Ponder if you have high debts that will accrue

 

Before taking out a loan it is important to evaluate all your debts to avoid accumulating compromises impossible to be honored. If your company has a high level of indebtedness and can not guarantee the necessary profitability for the payment of these debts, your business runs the risk of going bankrupt.

Therefore, it is important that you do this prior analysis to avoid further losses in the future.

Check the status of your working capital

 

It is usual in the corporate world to apply for loans to finance corporate working capital. Such an operation is not very bureaucratic, allows payment of installments in advance and does not have such high interest rates.

So if your company needs to increase its cash flow or have emergency problems, this working capital financing option can be a good alternative.

Analyze if your company is innovative

 

Scenarios change constantly and often, unexpectedly, bringing up new business opportunities. Faced with these changes, companies must always innovate, otherwise they will lose space in the market, which is increasingly competitive.

As companies do not always have enough capital to finance innovation, borrowing is a good option. However, it is important that you research the conditions offered by the banks to choose the most cost-effective one.

Analyze if there are expansion opportunities

 

Understanding markets and competition is important in assessing the right moment to expand your business. Therefore, when you see a prospect of increasing demand for the products or services of your business, you will be faced with the need to expand your business.

With this, the loan application presents itself as a good alternative to ensure the profitability of your business.

Simulate financial institutions

 

Many banks offer the possibility of simulating financing online. From these tools you can find the interest rates and terms that best suit your profile and ensure greater profitability for your business.

Therefore, it is imperative to make these simulations before hiring a loan, to choose the one that corresponds to the best cost-benefit.

What are the documents required for taking credit?

Borrowing from financial institutions can be a very bureaucratic and time-consuming process . As the required documents vary by institution, below is the list of required core documentation:

  • social contract;
  • corporate structure;
  • balance sheet;
  • independent audit opinion;
  • copy of the sheets of the Integrated Declaration of Economic and Fiscal Information of the Legal Entity – DIPJ;
  • analytical balance sheet;
  • monthly invoicing of the last fiscal year;
  • business plan in case of opening or expanding the company.

It is important to point out that, when identifying the real need to request a loan to finance your company, you should research what business lines of credit exist in the market and that best fit your profile – the most common are the anticipation receivables, working capital, financing and microcredit.

Understand what are the factors that should be taken into account when applying for a loan with financial institutions? To learn more about this, subscribe to our newsletter and have periodic access to exclusive content that will help you to become more profitable with your business.

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