We have already published a number of articles on strategies and tips for companies in corporate credit, however, we have never applied a strategy used by households to reduce the burden of their credit responsibilities, the consolidation of credits.
Consolidating loans has many advantages for families and companies, and in the latter case, the advantages can be significant and extremely important, especially in times of scarce liquidity.
From the experience I have, there are innumerable cases of companies that start their processes of financial control on the liquidity side. The excess of short-term credits and the latter’s pressure on the company’s treasury makes the latter see its responsibilities to banks and suppliers compromised.
This scenario gives rise to the first delays with suppliers, constant requests for payment postponement, and, in extreme cases, defaults on banks and the State.
Detecting these small financial dislocations is a task not only for the company manager but also for the manager of your bank.
However, most of the time this does not happen. The bank manager sees the company’s cash requirements as a business opportunity, promoting more cash products, such as checking account credits or promissory notes.
This harsh reality leads companies to significantly increase their credit responsibilities by stifling their liquidity in the medium term.
As much as it costs such an affirmation the manager of your company is you, the entrepreneur. No matter how much you believe in your company, you should see it as a real business, where all elements are negotiated and your company’s reputation with all partners depends on the quality of your business indicators.
Believing that moments of bonanza will come and that all the work and sacrifice you do today for your company will be rewarded in the future is correct, however, allowing today your company is hiring excessive responsibilities for the future can absorb all your effort .
Your account manager will advise you on solutions for your business but will not manage your business. You should evaluate each solution, the pros and cons and your ability to cope with such solutions, especially if these are business credits.
A credit solution widely used by households, especially when they are already in default with banks.
The Consolidated Loan is also available to companies so that they can ease the burden of the monthly financial charges in their treasuries. However, neither businesses nor families need to wait for the first failure to access this credit solution. They should do so whenever they detect possibilities of future default.
In the case of companies, this tool gains more prominence and importance when the credit portfolio of the latter is made up of short-term financing, such as current account credits with interest rates averaging 6%, discount of effects where rates interest rates are around 10%, overdraft facilities where average rates are around 16%, credit cards with rates higher than 20% and loans with interest rates of around 6%.
Consolidation thus emerges as an effective tool for renegotiating corporate credit. It is defined as the possibility of having a single loan, of a value less than the sum of the monthly payments of the various loans, by the payment of a lower interest rate and by an extension of the term of the financing.
The possibility of concentrating all of its liabilities in a single installment will allow the financial weight of the latter to be reduced in the corporate treasury, especially if the consolidation is in the medium and long term and consists mainly of short-term loans.
If you are an individual entrepreneur, you can also look at personal credit consolidation as an additional way to save some more money. Why not use the consolidated credit simulator?