The four biggest difficulties startups face in accessing credit

In Brazil, where 99% of companies are small and medium-sized and account for more than half of formal jobs, access to credit is still one of the biggest challenges for business. The problem is not new, but remains an invisible barrier that stifles opportunities, limits investments and reduces growth potential.

According to SEBRAE data, there are 6.4 million establishments in the country, of this total, more than 6 million are small and medium-sized companies. But in practice, most of these companies run into a financial market structured to serve giants, not small entrepreneurs.

Who comments on the subject is the expert Gabriel Cesar, CEO of M3 Lending, fintech that facilitates access to credit for companies. He points out some of the main difficulties faced by SMEs, such as bureaucracy, strict requirements and lack of credit history, barriers that limit the growth of these companies. But do not worry, there are alternatives to overcome them. Check:

1 ^ The requirement for guarantees

The requirement of guarantees is one of the biggest challenges faced by SMEs in the search for credit. Most of these companies do not have enough assets or assets to offer banks, which restricts their financing options and makes credit inaccessible to businesses, especially those in the consolidation phase. This scenario limits the growth of companies, since without access to adequate credit, they face difficulties to invest in expansion, modernization or improve their competitiveness.

In addition, as SMEs are considered riskier due to their nature and size, financial institutions tend to require more robust guarantees, such as real estate or high-value equipment, which is often not within the reach of these companies.

2 Credit history

Another major challenge faced by SMEs is the absence of a credit history, a factor that hinders access to financing. To build a good financial reputation, companies need to obtain credit, but without a previous history, banks often refuse loans. This vicious cycle prevents the growth of small businesses, limiting their opportunities for expansion and investment.

In addition, many entrepreneurs face difficulties to prove their ability to manage finances and generate profit, important factors for obtaining credit. Thus, alternatives, such as personal credit, are often more expensive and are not ideal to sustain the long-term growth of the company.

3. Financial organization

Financial disorganization is also a bottleneck when it comes to the search for credit. The lack of accurate and well-structured information makes it difficult for banks to analyze the financial health of the company. “Without organized balance sheets and formalized documentation, many businesses cannot even initiate a credit application. The difficulty in complying with bureaucratic requirements not only delays the process, but also frustrates entrepreneurs, who end up wasting time and opportunities”, explains Caesar.

Therefore, financial organization should not be seen only as a bureaucratic issue, but as a strategic tool for the success of the company. The adoption of good financial management practices, such as maintaining strict accounting records, cash flow planning and the organization of tax obligations, is essential to not only facilitate access to credit, but also to ensure sustainability and long-term business growth.

4 'Choice of the wrong line

In addition, choosing the wrong credit line can turn into a real trap.“High interest rates and deadlines misaligned with cash flow often result in an even more serious financial imbalance for the” SMEs, warns the CEO.For those who already face difficulties, such as outstanding debts and a history of default, the challenge becomes even greater.“Companies with financial problems are seen as high risk, and the response of banks is often always the same: negative”, he adds.

In addition, many financial institutions offer credit lines that seem advantageous at first glance, but that, over time, prove harmful. The lack of a more detailed analysis of the financial profile of the company may result in payment terms incompatible with the revenue generating capacity of SMEs. This lack of adequate planning may even lead to business bankruptcy that, in other circumstances, would have the ability to recover.

Platforms help with higher values and lower interest rates

Thus, alternatives such as fintechs and digital credit platforms have been gaining strength. M3 Lending, for example, bets on a model of direct connection between companies that need credit and investors seeking profitability.“ Interest rates are 22% lower than those practiced by conventional banks, in addition to a digital process and reduced bureaucracy”, says Cesar.

The fintech proposal is to unlock credit for SMEs in an accessible, transparent and less bureaucratic way. “Our goal is to give small and medium-sized companies the chance to grow without being held hostage to a system that often does not see them as a priority. Technology allows this, and we are here to make this bridge”, concludes the CEO.

Founded in Belo Horizonte (MG), M3 Lending began operations in 2021. Fintech connects small and medium-sized companies in search of credit to investors, mainly individuals, who wish to allocate capital to these businesses. With only R$ 250, any investor can participate in the platform and diversify their investments, while boosting the growth of Brazilian entrepreneurs.

Currently, there are more than 2 thousand people connected to M3, both as borrowers and investors, informs the CEO.“It is a more inclusive financing model, connecting, on the one hand, those who need working capital, on the other, those who intend to invest, contributing to the growth of companies.”

Among the main reasons for seeking credit, according to the company, are: purchase of new inventories (20%), the opening of new units (25%), the expansion of facilities (15%) and the expansion of operations (40%). “This shows that companies are seeking credit to grow and strengthen working capital”, says Gabriel Sousa Cesar, CEO of M3.

In this way, fintech can offer better credit conditions & OLS even compared to conventional banks.For the same case, the amount made available can be more than 50% higher than what a traditional financial institution would offer, calculates the CEO.