When we have an urgent need in our organization, we have to face an obligation, repair, or replace some expensive equipment or want to grow or reinvest. Still, we find ourselves lacking liquidity, where what we have available is to meet our most immediate obligations; it seems that the only possible alternative is to apply for a loan from a financial institution. We take a deep breath, make the sign of the cross (if we are Catholics and, if not, also), and go to a nearby bank agency, more full of fear than hope. This is the beginning of what, for many, is an absolute nightmare.
The credit imbroglio
In connection with applications for loans for companies, before banking institutions, various problems are generated. In principle, with all the procedures to be carried out and the requirements to be met, although according to the information provided by any bank’s web page, one might think that this will be a friendly process. There is no doubt that these are serious companies; but, as they also have to answer to a board of directors and a shareholders’ meeting, to back up every disbursement, to guarantee the return, to ensure a profit, the credit application and approval process becomes a marathon through a narrow alley.
Secondly, there is the problem of time: our needs are urgent, unpostponable because they are related to our production processes or represent real opportunities that we cannot afford to miss; on the other hand, everything in the process of applying for credit approval seems to be designed to delay the process as much as possible, for matters that may turn out to be insignificant in the long run. But what to do? Bureaucracy, public or private, is like that; it has always been like that. If we face it, we know what awaits us.
Once the credit is approved, when this happens, when at last this happens, the additional problem comes later when we discover that we have partly corrected the wrinkle; that is, we solved an immediate problem. Still, sometimes we realize that when an installment has to be paid, our liquidity is affected again, and we start to do like the juggler on the tightrope who throws up the balls, pins, and plates.
Other credit and financing alternatives
But if it is not bank loans, then what can we do? Apart from not pulling our hair out and trying to remain calm and not fall into the hands of a private person, who may ask us for the soul of the company in exchange for the money we need to meet our obligations, buy equipment, repair it, reinvest, pay for that merchandise that is about to come in?
Today there are several credit and financing alternatives for companies, which are not those of traditional banking. There are, for example, loans between individuals and companies, which are called peer-to-business lending, p2blending, or crowdlending, where a community of lenders (they can be individuals or companies) finance SMEs through loans or credits; of course, such lenders invest their capital in exchange for a profit, which is constituted, in this case, by the interest on the loan.
From the applicant’s point of view, the advantage is that the paperwork can be less cumbersome and the process less time-consuming. From the lender’s point of view, the platform is the intermediary that can guarantee the return on its investment. In both cases, the platform regulates, avoiding usury.
Other alternatives to avoid losing liquidity
When we go to a banking institution to request a loan to be able to respond to a situation due to our lack of liquidity, we are doing what human beings often do when facing a problem: attacking the consequence (loss of liquidity or need for money) and not the cause (what causes us to lack liquidity). Suppose we pay attention to this, and we focus and align ourselves in a strategy that aims to avoid liquidity loss. In that case, we will see that it is unnecessary to fall into all these problems we talked about initially.
So, the main thing to think about is how do I avoid the loss of liquidity? Today, there are several alternatives for that, not only to apply for credit but even not to apply for credit at all. These are business community platforms, such as business e-commerce marketplaces, where members can make transactions, exchanging, for example, goods, products, and services, without spending their money, i.e., without affecting their liquidity.
Henry Ford once said that no matter where you put yourself, sooner or later, you will be someone’s debtor or creditor. But, with these types of marketplace platforms, it seems that committing to credit, on standard terms, need not be an unavoidable nightmare.