Simple credit: a tool for your company

The good use of a simple credit in a company can be a lever to boost business growth.

For this reason, it is necessary to know the basic elements and give you some tips to use this tool in your favor.

What is it?

What is it?

A simple loan is a money loan made by companies such as Athos to businesses with financing needs for working capital, buying machinery, equipment or supplies to increase production or improve their services, in exchange for an interest rate and during a given period.

How is it composed?

How is it composed?

A simple credit consists of:

1. Capital: is the amount of money that the institution lends and from which the interest derives.

2. The interest rate: which is the percentage that will be paid extra based on capital. It should be noted that this can be fixed or variable.

3. The term: it is the time in which the credit will be valid and in which the person must pay the capital with the interests.

4. Amortization: are the payments that must be made to settle the credit, which includes both capital and interest payable.

5. Late payment interest: as the name implies, these are interests that have to be paid for non-payment of the simple credit payment.

What is its main characteristic?

What is its main characteristic?

A simple line of credit differs from another type of credit by its life period; that is, this loan may be used only once during the agreed term. At the end of the term and the loan settled, it is necessary to open a new line of credit.

What types of simple credit exist?

What types of simple credit exist?

There are two large groups: with guarantee and without guarantee.

With guarantee: These business loans require a good, property, machinery, guarantee or payment of advanced monthly payments as collateral, in case of non-payment of the loan.

Generally, this type of simple credit has better interest rate conditions, since the guarantee reduces the risk of default.

No guarantee: This credit does not require any kind of guarantee. The loan is granted to companies with acceptable financial health and interest rates are generally much higher than collateral financing.

Now that you know what a simple credit is and how it is composed, we will share some tips to use this financial tool.

Tips before hiring a simple loan.

1.- Find out before requesting a loan

Not having a clear financial strategy, little or no knowledge of the use of credit or indiscriminately using financing, are the perfect recipe for your company to get over debt. Get advice and know how financing works for your company.

2.- Determine your financial situation before hiring a simple loan.

Ask your accountant for a balance of your company’s financial situation to make better decisions. Pay attention to financial leverage and the generation of your business flows, as these are key to determining whether or not it is possible to pay a loan.

3.- Have a well defined objective for the destination of that loan.

Before seeking financing, it seeks to justify the hiring of a simple loan; that is to say, you must have projects whose feasibility of execution is very high, as well as knowing what is going to be bought, what is going to be invested, how much will be allocated to this or that area, etc.

4.- Look for the best conditions for your loan

One would believe that the ‘best conditions’ are loans with very high amounts and with low interest rates, but really, the best conditions are those that go according to the financial situation of your company.

Do not hire or accept credits whose amounts exceed your ability to pay and try not to acquire financing with high interest rates or to finance you with your personal credit card.

5.- Order your financial and fiscal information

Many entrepreneurs surrender to the perception of endless paperwork when asking for a loan. The truth is that the information requested by financial institutions are documents that your company already has: you just have to keep it tidy and up to date.

Contact your accountant to organize this information and have arguments backed by documents to apply for a loan and be a good candidate.