Of small enterprise homeowners, 61% resorted to private loans to finance their very own enterprise

Of small enterprise homeowners, 61% resorted to private loans to finance their very own enterprise

The increasing difficulty in accessing credit through formal means and the lack of financial education have led most small business owners to resort to bank loans through individuals and not through the companies themselves. The survey “Financing of Small Businesses in Brazil”, carried out by Sebrae, shows that 61% of the amount formed by micro and small companies and individual micro-entrepreneurs (MEI) that resorted to financing or bank loans in the last five years made the request directly, not using the legal entity of the business. This percentage represents a record in the historical series of the survey started in 2013.

For the president of Sebrae, Carlos Melles, this reality identified in the study is a direct result of the significant growth in the number of new MEIs in the economy and the reduction of funding sources.

“Between 2020 and 2022, according to the Portal do Empreendedor, of the Ministry of Economy, a total of 5.2 million new individual micro-entrepreneurs were created in Brazil, which represents the profile of the small business owner who most resorts to personal loans for finance the company.

According to the Sebrae survey, 73% of MEI sought credit through individuals in the last five years. The president of Sebrae also recalls that the schooling factor also affects this scenario. “The higher the level of education, the greater the chances of the entrepreneur using conventional ways to seek credit for the company. Among small business owners with graduate degrees, for example, about 63% use the legal entity to resort to banks. Among entrepreneurs with a fundamental level, only 32% adopt the same path”, he adds.

Carlos Melles recalls that separating accounts between personal and company accounts is one of the first recommendations that Sebrae makes for anyone planning to open their own business. “Confusing the management of the company and the individual is one of the biggest mistakes that entrepreneurs can make. This makes controlling the company’s budget practically impossible and can seriously compromise the financial health of the business. Without good management, there is no growth, solidity, increased revenue, profit and everything else you look for when starting a business ”, he comments.

Difficulty accessing credit

The Sebrae survey shows that, between 2020 and 2022, the proportion of entrepreneurs who found it difficult to obtain new credit or financing grew. The proportion jumped from 63% to 84% (a historic record for the series).

The lack of real guarantees (20%), the very high interest rate (17%) and the lack of a guarantor/guarantor (11%) were the difficulties most cited by small business owners who sought a loan or bank financing.

Check the survey numbers:

  • 61% of small businesses took out loans through individuals.
  • Among the MEI, this proportion is higher – 73%.
  • Among small-sized companies (EPP) and micro-enterprises, the percentage is lower: 50% and 53%, respectively.
  • 63% of small business owners with graduate degrees use their legal entity to apply for loans and financing. Among entrepreneurs with only a fundamental level, this proportion drops to 32%.

Source: Sebrae Agency

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