Surely you thought that being an entrepreneur was going to be easy: having your own schedules, doing what you like the most, being your own boss. But it’s not all “honey on flakes” when it comes to having your own company.
Suddenly you have to deal with annoying customers, with not so happy employees and, as if that were not enough, financial situations.
What is financing?
Financing is the process by which companies or people are made of resources to cover a need or undertake a specific project. Today, among the most common and helpful sources of financing is credit granted by banks.
In the specific case of companies, it should be noted that financing options can be diverse. In addition to the opportunity to go to banks to apply for a loan, companies could seek the participation of investors who inject resources into the company.
On the other hand, talking about financing for Small and Medium Enterprises is a separate chapter. Although these types of companies have faced significant challenges in obtaining financing, little by little they have begun to generate a variety of specialized solutions for this productive segment.
What are the various financing options for small and medium-sized businesses?
Currently, there are two major financing options for Small and Medium Enterprises: credit and investment.
On the one hand, although the criteria for granting credit represented an obstacle for SMEs to access resources from institutions such as banks, little by little this burden has been disappearing.
In this regard, not only have banks entered a process of improvement, where products have been created to meet the needs and realities of small and medium-sized enterprises, but financial alternatives have diversified. Above all, Mexico has witnessed an irruption of technology companies specialized in granting loans for this productive sector.
On the other hand, it should be noted that investment has long become the only source of financing for SMEs. Especially understanding the investment by the close circles of the companies. Today, as in the credit issue, options have appeared, such as collective funding.
Small and medium-sized businesses also have credit history
Although many think that asking for a loan is a symptom of financial mismanagement in your SME this is not 100% true. According to INEGI, 22.7% of microenterprises in Mexico limit their growth due to lack of credit.
Imagine that your company is doing quite well, growing, having more and more happy customers and employees. And you consider that it is time to take the next step: change offices, have better facilities, invest in technology, this with a view to that in the medium or long term, it will be an investment for your business.
But maybe you don’t have the immediate capital to do it. Asking for a loan is not bad, as long as you evaluate as a moral person how that financing will help and the impact that this credit will have on the finances of your company.
Things you should consider when applying for a loan
Interest rates
Please, never, never take a loan, no matter how small, if you don’t know what the interest rate is. The recommendation is, now that there will be elections the interest rates may vary due to uncertainty. Choose a fixed rate instead of a variable one, that will ensure the amount to pay.
Different options of institutions
Check which financial institution is best for you. There are different products that can be attractive depending on what you need.
Requirements you may be asked for
Annual income
Depending on the amount of money, the institution may ask to check minimum annual income to make sure you can cover your credit payment.
Be registered in the Treasury
Phew! This is very important. Even if your company is small, you need to be registered in the SHCP. To know which regime best suits your needs, we share this sat.gob.mx/.
“Solidarity guarantee” that is, a very trustworthy companion
Many institutions ask for a joint and several obligation, credit references or joint and several guarantees. To choose a person or company that can serve as a reference do not forget to have communication with that person or company so that all the terms are clear regarding the credit or financing you are going to request.
Although there are other institutions such as La Tasa that, thanks to its accredited selection process, do not need this figure. Only an analysis of your financial situation is made and you are granted the credit without joint and several guarantee.
Documentation
Of course they will ask you for identifications of the attorneys, tax returns, tax identification card.
Sources of financing of a company
Today, the sources of financing for small and medium-sized enterprises can be divided into:
- Banks. More and more banks are betting on providing financial solutions for small and medium-sized companies.
Currently, within the banking portfolio aimed at this sector, you can find various types of financing, designed to support SMEs in different needs. You can talk about financing ranging from Simple Credits or Revolving Credits that allow them to have the liquidity to carry out their day to day. Here, it is important to note that financial institutions have decided to expand their products and today it is possible to find credits even to support export, or sustainability.
In addition to financing options, banks have opted to support management issues, which facilitates the realization or receipt of payments through banking schemes.
- Today, under the protection of technology, several companies dedicated to the specific funding of small and medium-sized enterprises have been born in the national market.
Contrary to what one might believe, the financial amounts are in accordance with the needs of small and medium-sized enterprises, understanding their reality. For example, today there are alternatives that offer credits ranging from 50,000 to 6 million pesos.
- Crowdfunding. Collaborative funding has been placed as an option to finance a project, although this alternative is more adapted to projects that are in the entrepreneurship phase.
In addition to the above, it can be highlighted within the framework of the sources of financing to Non-Banking Financial Institutions and Government Programs.
Government support for funding
It also takes into account that there are special financings for certain sectors of the market that help in a more specific way supported by the government such as
- Tourism sector
- Agriculture
- Energy sector
- Automotive
In Bancomext you can find more information and the complete list of sectors that are supported with government financing.
If your company is starting and you need a little push, or if you have a more solid company that requires financing to grow or you need to support yourself in complicated times, look for options that fit your business.
Advantages and disadvantages of financing options for small and medium businesses
Although the spectrum of financing for small and medium-sized enterprises is increasingly opening, there are still a number of challenges to be addressed.
For example, in the case of bank financing, although it offers attractive conditions, one disadvantage that companies face is the requirements requested. And in this case, not only for banks, but for Non-Banking Financial Institutions (IFNBs).
According to the 2018 National Business Financing Survey, at least 51% of rejected credit applications had to do with not meeting requirements, such as having a credit history. In some cases, the lack of documentation was the impediment to access a loan.
