Home Business Demand for Business Credit Grows 3.4 Points in July

Demand for Business Credit Grows 3.4 Points in July

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After a period of retraction, the market begins to show signs of resumption of credit concessions. This scenario has resulted in an increase in the demand of micro and small retail companies and services (SMEs). Data compiled by the National Confederation of Shopkeepers (CNDL) and the Credit Protection Service (SPC Brazil) show that between June and July, the indicator measuring the intention to contract credit registered an increase of 3.4 points. On a scale of zero to 100, the June result was 22.8 points, the highest value since the beginning of the historical series.

In comparison with the months of July of the previous years, there was an increase in the appetite for credit. In July 2017, the index was at 11.3 points, while in the same period of 2016 it was at 10.8 points. By methodology, the closer to 100, the more likely entrepreneurs are to seek credit, and the closer to zero, the less likely they are to borrow.

In the evaluation of the president of the CNDL, Jose Cesar da Costa, the gradual recovery of the economy already results in a more positive picture. “As soon as we observe greater real interest rate declines, there will be a greater stimulus for the contracting of credit in companies. Today, confidence in the resumption is still timid, however we see in the sectors of commerce and better sales services, “says the president.

In percentage terms, 14 percent of micro and small entrepreneurs consider the possibility of contracting credit for the next three months. Of these, 37% intend to use for working capital, 22 percent seek external resources to pay debts, 20 percent to reform company and 18% to buy equipment and machinery.

However, 73 percent discard the possibility of contracting credit in the third quarter, mainly because they believe they will be able to keep the business with their own resources (53 percent) and because they consider interest rates to be very high (30 percent). In addition, 25 percent said they were unsure of the country’s economic conditions.

Among entrepreneurs intending to take credit in the coming months, 42 percent plan to borrow, 17 percent seek financing and 10% want to contract business credit cards. On average, the amount to be borrowed will be 35,887 thousand reais. “When the business environment is more stable and with a better perspective of consumption, we will see a greater growth in the demand for credit and investment of micro and small entrepreneurs,” says SPC Brazil president Roque Pellizzaro Junior.

Another indicator measured by CNDL and SPC Brasil is that of Propension to Invest. In July, the index hit 40.9 points. The services sector showed a greater interest in investing (42.0 points) than the retailer (39.9 points). In the annual comparison, that is, with July 2017, the indicator advanced 13.2 points. By the methodology, the closer to 100 points, the greater the appetite of the MPE to invest in the next three months; the further away, the lower the appetite.

According to the survey, the intention to invest has moved forward in the course of the year, but has remained practically stable in recent months, reflecting the uncertainties of the election. Nearly half (49%) said they did not plan to invest in improving their business over the next three months. The main reason is that the country has not recovered from the crisis so far (37 percent), while 35% said they do not see need. In addition, 20% said they have made investments recently and are awaiting the return of the applied resources.

On the other hand, 34 percent of entrepreneurs signaled that they intend to invest in the next quarter, mainly to increase sales (60 percent) and to meet demand growth (22 percent). Among the priority investments were the purchase of equipment and machinery (25 percent), inventory expansion (24 percent), media and advertising (23 percent) and company reform (23 percent).