Microcredit: What are its characteristics and where to apply it?

Starting a new business or running a small or medium business (SMEs) can be very challenging. Sometimes it takes a little push to achieve your goals and microcredit acts on this very issue. Microcredit works as a stimulator of productive activities for small and medium enterprises and for people who are seeking to have their own business.

Microcredit is a mode of providing loans to low-income people, microentrepreneurs and small businesses. Even with low incomes, financial education regarding the use of credit is required to avoid debt development. This focus is due to the fact that credit is granted at lower values.

In Brazil, generally, it goes up to a maximum of fifteen thousand reais for the MEI.  

How does microcredit work?

credit loan

Companies that provide this form of credit use methodologies based on the direct relationship with small and medium enterprises and MEI (Individual Microentrepreneurs), usually the process that happens where the business is located. Financing retains some specific characteristics, changing only a few details from organization to organization, but always keeping microcredit interest low.

Among other specifics are:  

  • It is intended for small productive activities, whether starting new businesses or upgrading existing ones;
  • The amount of funding is generally low, but it is compatible with the needs of each individual SME and microenterprise. Microcredit is always based on ability to pay;  
  • When applying for microcredit, usually no prior guarantee or pledges are required. The ome people opt for the practice of joint debtor (group of people who come together to receive this credit and give the small business owner or SMEs, through an endorsement signing jointly);
  • There is also individual endorsement, it is usually a known person who acts as guarantor of the financing, in case of non-payment, this person will pay for you.

Deadlines and Credit Appraiser

Credit Appraiser

The term and the agent appraiser are two key pieces of microcredit. The crosswise Them, and SMEs MEI s can be aware of and planning in order to meet your requirements and goals.  

Microcredit Deadlines  

They are short and linked to how you will use this credit, your cash flow and your business activities.  

The Microcredit Agent

It will be the person who will visit your business to evaluate the investment made, to monitor how the resources have been used and to advise on some practices. This includes everything from business administration to resource logistics.

What are the advantages of microcredit?

What are the advantages of microcredit?

It is noticeable that credit for SMEs and micro entrepreneurs helps in the development and sometimes even the initial toe of the business. But unlike other lending lines, microcredit has some advantages:  

  • Microcredit rates are very low compared to other forms of credit in this market (payroll loans, ren tax anticipation loan from a personal credit);  
  • Less bureaucracy to release credit due to agility to undertake, especially when some market sectors arise from new needs;
  • Boost air and expand the US business go without waiting for profits to reinvest s power;
  • Increasing business income, imagine that you invested according to the prospects and advice of the loan officer, then, The financial return is imminent.  

Use microcredit to set the course of your business

Getting a good line of credit is a special opportunity for many types of businesses. Therefore, it is important to conduct a research and comparison between credit offers and institutions, thus facilitating finding the best option for you.

It is important to remember that the Microcredit usually applies when a change in your business is imminent and necessary, especially if this prospecting is to achieve a goal.