Posted in June this year, Project Crossing Credit is a government-created financing facility for micro and small businesses. With funds from the Worker Support Fund (FAT), the amount of $ 5 billion will be allocated to the working capital of entrepreneurs. But what extent is it worth resorting to funding? Then understand what the expected returns are from the Government, and know the interest rates to advise the financial viability for your company.
How Project Crossing Credit Works
The Brazilian unemployment rate reached 10.9% in the first quarter of 2016, the highest result ever recorded in the series of the National Continuous Household Sample Survey (Pnad Continuous), which began in the first quarter of 2012.
In addition, data released by the Brazilian Institute of Geography and Statistics (IBGE) indicate that there are more than 11 million Brazilians looking for a job. To mitigate the effects of the economic crisis and curb this rising unemployment, the Government decided to implement the Crossing Project, which gives resources to micro and small companies. According to Sebrae, they represent 99% of companies in the country, and account for 27% of Gross Domestic Product (GDP). Of the $ 5 billion of credit for Crossing Project, $ 3 billion will be passed on to entrepreneurs by financial institutions, such as private banks, public banks and credit unions.
The rest of the money will be directly financed by.
The interest rate will be 17% per annum for financial agents and 19.3% per annum for Linao Bank. Each company can have access to a limited financing of $ 200 thousand, and the resources should be used mainly in the working capital of micro and small companies. The loan repayment term is up to 48 months, with a six month grace period to start repaying the installments. Microenterprises (maximum annual revenues of R $ 360,000) and small businesses (maximum annual revenues of R $ 3.6 million)
Project Crossing Credit requires counterpart from companies
In order to have access to government resources, companies must commit not to lay off employees for a period of one year from receipt of the money. In addition, micro and small enterprises with more than ten employees should hire a young apprentice aged 14 to 18 to facilitate the insertion of young people into the labor market.
It is a social counterpart demanded by the Government to curb unemployment and lessen the impact of the economic crisis on micro and small enterprises. Companies that are unable to offer guarantees to opt for financing will have the resources of the Micro and Small Enterprise Guarantee Fund (Fampe), in the total amount of $ 730 million. To use this money as collateral, the cost varies between 4% and 6% per year, depending on the agreed deadlines.
Credit decision implies in-depth reflection
Now that you know the amounts, interest rates, and requirements for applying for Project Crossing credit, the time has come to consider whether funding is worthwhile.
The decision is not simple, and should take into account several aspects, such as:
Current financial situation
Before applying for funding, you need to know your current financial situation in detail. For this, the ideal is to make a balance of all income and expenses of the company, with the help of a chart of accounts that allows a complete and accurate diagnosis. Without this information in hand, you risk borrowing at the wrong time, or for the wrong reasons, which tends to increase your expenses and make the business unfeasible. Remember: Total control over finances is a condition for those who want to seek external credit.
Planning is essential to designing the business with and without funding. Meet with the organization’s partners and finance officers and try to get a glimpse of the company’s economic situation in the short and medium term. Can the company survive without funding? For how long? Is it really vital for performance?
At this time, you should simulate different scenarios to predict which solution the company would adopt in all situations. This analysis allows us to understand the importance of credit in various contexts. Make optimistic and pessimistic reflections to be prepared for all possible scenarios. This consideration is also important in finding out if you can meet both Government requirements for Project Crossing creditors: not firing employees for one year and hiring a young apprentice if the company has more than ten employees. Can you handle this obligation?
As an expert in taxation and business finance, the accountant can be an excellent financial advisor for your business. With the help of this professional, it is possible to make in-depth reflections and come up with a realistic diagnosis about the company’s financial situation. Never make the decision to resort to funding before you know the opinion of your accountant. By discussing together with your trusted professional, you will be able to give the final word on the viability and need to take credit from Project Crossing.