All about smoke credit: why is it important for your business?


One of the easiest ways to raise funds for a company in the financial market is through smoke credit. Have you heard of him?

Basically, it consists of a loan that is guaranteed by amounts that will be received in the future, usually from sales made via credit card.

This is a type of loan that is confused with the guarantee of receivables, although it has some differences. It is worth mentioning that one of its main benefits is that it is less bureaucratic, in addition to generally having lower interest rates.

In this article, we are going to talk more deeply about what smoke credit is, how it is granted to companies and what are the ways to access this line of credit. Good reading!

What is smoke credit?

Smoke credit is a loan in which a company's receivables are used as payment guarantee, such as credit card sales. This reduces the risk of default for the creditor financial institution, as the guarantee involves the amounts that the debtor company has to receive.

One of the outstanding points for this type of loan is that it is more accessible, since the entrepreneur does not have to go to the big banks to apply for it. And since the credit risk is reduced, the requirements tend to be lower as well.

What determines the credit analysis and the amount to be made available are the company's future receivables . Therefore, when there is good sales predictability, there is a greater chance of credit approval.

How does smoke credit work?

Smoke credit has a dynamic similar to that of other loans. When requesting it, a credit analysis takes place, which involves which are the receivables of your business that will be used as collateral, among other factors.

For example, the lending institution may request a 12-month sales history, in order to observe predictability and assess whether the company is really eligible to take out this line of credit.

With this data in hand, the bank makes an estimate of how much cash flow the company will have over the next few months, which provides a personalized credit offer for each business.

Once the amount is released, you must sign the contract. At that moment, the “Maximum Daily Retention Value” is determined , also known as VDRM.

This is the amount that will be deducted from the total sales made to repay the loan. This is how the amortization of smoke credit happens.

Smoke credit example

To make it easier to understand, let's imagine an example. Consider that, after going through the credit analysis, the company was able to release the amount of R$ 10,000. The VDRM determined for granting this credit was R$ 500 per week.

In the first week after taking the credit, imagine that you made a sale of 2,000 on your credit card. From there, R$ 500 will be deducted to amortize part of the smoke credit, that is, the company receives R$ 1,500, less transaction fees for the R$ 2,000 sold.

Regardless of how much you sell per week, the maximum amount to be discounted will be R$500. And this will happen until you have paid off the entire amount of the loan, plus the agreed interest.

What is the smoke credit for?

Smoke credit is used to make investments in the company, whether for working capital or the purchase of inventories and machinery. It can also be used to pay wages and other bills. In this line, the entrepreneur is free to choose where to apply the money, considering the payment of installments and interest.

What are the advantages of smoke credit line?

There are many advantages for companies that choose to take out smoke credit. One of them is that the analysis process is less bureaucratic compared to the other lines. In addition, interest rates are also lower when compared to personal loans, for example.

It is worth remembering that there are other lines of credit with even lower interest rates, however, with more bureaucracy, such as the loan with property as collateral. In any case, the advantages of smoke credit involve the practicality of access and ease of payment.

At the same time, the bank can create a customized smoke credit proposal for your business, based on the sales forecast, which favors cash flow.

What is the difference between prepayment of receivables and smoke credit?

Smoke credit and prepayment of receivables are different lines of credit. In the first, you take out a loan and pay with the amounts you will still receive, according to the sales forecast. In the second, you anticipate the amount you have to receive, considering the sales that have already been made.

It is worth mentioning that the decision between taking out a smoke loan or anticipating a receivable must be carefully determined, evaluating the amount made available, as well as the interest that will be charged on each operation.

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