Debt forgiveness for individual microentrepreneurs (MEIs), approved by the Senate and the Chamber of Deputies, can alleviate the financial situation of millions of small businesses, but it does not eliminate the problems that lead so many entrepreneurs to be in the red. The analysis is from experts interviewed by g1.
Among the main factors are:
Difficulty accessing adequate credit;
Lack of planning; and
The mix between personal and company accounts.
The complementary bill provides for the forgiveness of MEI debts incurred until October 13 of this year and could benefit around 3.6 million entrepreneurs, with debts totaling approximately R$12.6 billion.
The proposal also increases the category's annual revenue limit and allows the hiring of up to two employees under certain conditions.
For Luis Otávio Leal, partner and chief economist at G5 Partners, renegotiation tends to alleviate the problem temporarily when it is not accompanied by changes in the financial management of the business.
“Debt renegotiation programs, whether for individuals or MEIs, only tend to temporarily alleviate the problem because they do not reach the core of the problem, the lack of cheap credit available and financial education so that personal financial life is separated from business life”, he states.
According to the economist, one of the main causes of debt is the use of company money to cover personal expenses.
The entrepreneur uses the business' cash to pay a credit card bill or family bills and then needs to take out loans to keep the activity running.
As a result, personal and business finances end up compromised at the same time.
The difficulty of obtaining credit under appropriate conditions worsens the situation, says Leal. Without sufficient resources to maintain the operation, the entrepreneur may resort to expensive loans, which increase the burden of debt on the budget.
Entrepreneurship out of necessity or opportunity makes a difference
Leal assesses that ventures opened out of opportunity are essentially different from those opened out of necessity.
In the first case, the entrepreneur usually identifies a demand and structures the business to meet it.
In the second, the opening can occur without planning, as an immediate alternative to generating income.
“While in the case of entrepreneurship based on opportunity, the entrepreneur sees this as his future, those based on necessity see it as a ‘gig’, until something better appears, which reduces planning and resilience”, he says.
This does not mean that every business opened out of necessity is doomed to failure. The difference pointed out by the economist is in the conditions under which the activity begins and in the preparation to manage resources, organize expenses and face periods of less movement.
For Leal, policies to support entrepreneurship need to go beyond renegotiation. He defends the expansion of access to subsidized credit lines — financing with favorable conditions — and the use of services from the Brazilian Micro and Small Business Support Service (Sebrae) to qualify microentrepreneurs.
How to separate personal accounts from company accounts
The first measure to organize finances is to treat business money and family money as different resources, even when the entrepreneur is the sole owner of the company.
"I would start with a simple rule: there are two different pockets, that of the business and that of the individual. The fact that the entrepreneur is the owner does not transform all the money that enters the company into money available for the family", says Antonio Maciel, CFP financial planner at Planejar.
This means that revenue — all the money received from sales or services provided — should not be confused with profit.
Part of the resources needs to be used to pay suppliers, taxes, operating expenses and commitments that are yet to expire.
Another portion may need to be reserved for the purchase of goods and the continuity of the activity.
Before transferring money from the company to the personal account, the entrepreneur must calculate how much is left after costs and expenses and check how much he can withdraw without compromising the functioning of the business.
Maciel illustrates the difference with a hypothetical example:
If a company receives R$6,500, has R$4,000 in payments and commitments and needs to reserve another R$1,000 to maintain operations in the following period, R$1,500 remains available.
Even if the calculated profit is R$1,800, withdrawing more than R$1,500 would compromise the money needed for the activity.
Revenues vary month to month, what now?
When income varies from month to month, the planner recommends analyzing the results of the last three to six months to establish a personal withdrawal that is also viable during weaker periods.
In the months with the highest sales, part of the money can be saved to compensate for any subsequent drops.
Control must be carried out on two fronts:
The company needs to record its sales, costs, taxes and commitments;
The household budget should only consider the money actually transferred to the entrepreneur as personal income.
If the family's expenses are greater than what the business can sustain, the solution is to review the household budget or look for another source of income, instead of withdrawing resources intended to pay suppliers and maintain the activity.
What are the first signs that debt is getting out of control?
Debt doesn't always start with late bills. In some cases, the entrepreneur continues to pay everything on time, but starts to depend on expensive credit to cover the month's expenses.
According to Antonio Maciel, financial planner, warning signs include using an overdraft, paying only part of the credit card bill or taking out a loan to pay off another. The problem can also arise when every inventory purchase depends on financing.
Therefore, just monitoring your bank balance is not enough.
The planner recommends observing four points:
The business result after costs and expenses;
The money available to maintain the operation;
The total debts and the weight of installments and interest; and
The volume of resources parked in goods, in addition to the deadlines for receiving payments from customers and paying suppliers.
A business can sell more and still face difficulties if prices do not cover costs. In the same way, you can show a profit on paper, but run out of money to pay the bills because customers are slow to pay or because the entrepreneur withdraws excess resources.
The source of the problem changes the solution.
If the activity can cover its costs, but there is no money after personal withdrawals, there may be an imbalance in the family budget.
If the cash flow is already negative before these transfers, it is necessary to investigate prices, costs, sales and receipt deadlines.
How to negotiate debts without creating a bigger problem
When realizing that the accounts are getting out of control, the entrepreneur needs to identify which commitments are essential to keep the company running and which can be renegotiated.
Maciel, a financial planner, recommends evaluating both the cost of debts and the consequences of failing to pay them.
Legal obligations, such as taxes and salaries, when there are employees, deserve attention, as well as commitments whose delay could cause the loss of essential equipment or interrupt the supply necessary for sales.
When comparing loans, one of the main indicators is the Total Effective Cost (CET), which brings together interest, fees, taxes, insurance and other operating expenses. It is also necessary to compare the total amount to be paid, the deadline and the size of the installments in relation to the money that the business actually receives.
A lower installment does not always mean a cheaper deal. In a hypothetical example presented by the planner, an agreement of 12 installments of R$320 totals R$3,840. Another, of 24 installments of R$230, totals R$5,520. The second option has smaller installments, but costs more in total.
“Renegotiation only becomes a recovery when the payment capacity changes and is accompanied by a correction in management”, says Maciel.
According to him, it is necessary to identify whether the difficulty arose from a temporary drop in sales, excessive personal withdrawals, stopped goods, inadequate prices or costs that the business cannot sustain. Unforeseen events and loss of income can also cause debt.
The planner also warns of the risk of using special checks and revolving card credit — a modality in which the consumer does not pay the bill in full — as permanent sources of financing.
A loan planned for a productive need is different from taking out credit every month to cover losses.
