The 4 keys you should know before acquiring a loan to boost your business

According to the latest Ipsos Peruvian consumer study, 4 out of 10 people consider starting a business in the short term. This is reflected in the exponential growth of new businesses, motivated by the context and the opportunities that arose as a result of the new normality.

Thanks to this Peruvian entrepreneurial spirit, our country ranks first in early entrepreneurship in the Global Entrepreneurship Monitor rankings. However, we also hold the first places in business mortality: almost 70% of businesses close in the first year and, of those that remain, only a few reach the first five years.

Among many factors, access to financing or credit is one of the causes. In this sense, Mario Roncal Zolezzi, director of the School of Administration of the Antonio Ruiz de Montoya University (UARM), shares four data that every entrepreneur should know before acquiring a loan to boost a business this 2022.

1. Evaluate the profitability of the business:

Before making the decision to apply for a loan, it is important to assess how profitable the business idea is. Having an innovative or trending idea is no guarantee of success. The profitability of the business results from dividing the profit obtained (or that is expected to be obtained) by the investment made (or that is planned to be made). If this operation gives a positive balance, check if the balance is enough to pay a possible credit.

2. Plan the use of credit:

70% of companies in Peru do not survive three years due to the way in which business finances are handled, according to the director of the School of Administration.

A common mistake of entrepreneurs is to use the credit obtained as a way to pay for their personal expensescausing the need for a loan to be inflated and can ultimately end up in over-indebtedness.

3. Compare entities and rates:

In the market there are several ways to acquire a loan, either by banks or finance companies. Those interested in acquiring a credit should not be taken only by who gives them more money or who facilitates it in a shorter process; On the contrary, the interest rates of each lender must be analyzed, how much is going to be paid monthly and if these fees go hand in hand with the income that the business will generate.

4. Requirements to take into account:

Although the requirements vary according to the financial institution, the user is usually required to have the business count from 6 months to a year of operationhave a good credit history and demonstrate the ability to pay.

Additionally, there are a series of documents that are requested: DNI of the owner, copy of the RUC of the business, operating license or tickets for the purchase of merchandise, copy of the last electricity, water or telephone bill, and a copy of the home ownership document (If you do not have your own home, a guarantee will be requested). As well as records of the annual financial statement, tax return, and cash flow.