Quite simply, banks are banks, but we're your partners in success.
February 10, 2022
As we all know, the economy faces major challenges in the short, medium and long term that require a stronger and more efficient financial system. To achieve this goal, it is necessary to involve other actors besides banks. In this scenario, the relationship between small entrepreneurs and capital markets is one of the synergies with the greatest potential for creating added value.
Funding is an investment vehicle that, although based in the capital market, is an important complement to the banking sector. In addition to funding companies, it plays an essential role in strengthening companies by helping them improve their corporate governance standards and business practices, which translates into higher value creation.
We agree that hard work, intelligence and creativity can help a business get off to a good start, but at some point it will have to resort to some form of financing to achieve its growth goals, and it is at this stage that the small business are most vulnerable. A small business has little to lose, and most mistakes are correctable. However, as the company accelerates its growth, its need for cash increases exponentially and much more is at stake if capital needs are not met. Although for many the first option is to turn to friends and family for financing, there are other options such as private equity funds or bank loans that have certain advantages and disadvantages that need to be analyzed.
Many people are afraid of debt, and the very word inspires distrust, but a well-used debt capacity is a powerful tool to grow your business. Businesses should not look at their debt like individuals. If your company is generating a better return than its cost of capital, it should take advantage of the opportunity, but always be objective and cautious about risk.
In this article, we want to educate you about the various options you have when you are looking for capital to raise. While banks have some advantages, there are other simpler and more agile alternatives for your business.
Bank loans are available to finance the purchase of inventory and equipment, as well as to obtain operating capital and funds for business expansion. These loans are a time-honored and reliable method of financing a small business, but banks often only finance firms with substantial collateral and a long track record, and the terms they offer are often very strict.
One of the biggest drawbacks of bank lending is that it is very difficult to obtain, unless a small business has a significant track record or valuable collateral such as real estate. Banks are careful to lend only to companies that can pay their loans clearly, and also make sure that they are able to cover losses in case of default. Business borrowers may be required to provide personal guarantees, which means that the borrower's personal assets can be seized in the event that the business fails and cannot repay all or part of a loan.
In addition, interest rates on small business loans from banks can be quite high, and the amount of bank financing for which a business qualifies is frequently not sufficient to fully meet its needs. The high interest rate for financing a company often delays its expansion, because the business needs to not only service the loan, but also deal with additional funding to cover funds not provided by the bank.
On the other hand, the market offers financial companies created to generate financial well-being for business owners by creating simple, transparent and easily accessible financial products. Small businesses need financial instruments to help them grow, so they can make strategic investments at the right time. There are many options to unlock the potential of small businesses through financial agility and tranquility. Finance is not the reason why you started your business first and foremost, that's why we offer you some options, so you can focus on what you do best.
Remember that it is always good to get help, as raising the necessary capital to fund a business is a complicated task for both entrepreneurs and business people. However, complicated does not mean impossible. A clear understanding of all the finances, sales and assessments of your startup will create confidence in investors.