Undertaking is not easy at all. In today’s market scenario, where competition is increasingly fierce, the situation becomes even more complicated. To survive, it is necessary to do an efficient self-management , improving every detail of the activity, such as cash flow control, tax expenses, relationships with suppliers, employees and customers, among others. http://apfsite.com has more information
In addition, it is very important to be aware of technological advances that may optimize internal processes in order to increase productivity and, consequently, profitability of the business.
All of these concerns and attitudes can bring good results to the venture , but we all know that it requires capital to apply.
It turns out that micro and small businesses often do not have many resources available – and this is when a loan can be seen as an investment because, if well planned, the return will be greater than the debt acquired.
However, some care is essential to make the most appropriate choice in each situation. To help you with this mission, we have written this article to show you the main advantages of borrowing from a cooperative rather than traditional banks. Read on and learn more about it!
How does a credit union work?
Credit unions are financial institutions that have a different operating philosophy than others.
They are also known as people’s associations and their operating systems can be seen as more democratic because, unlike traditional banks, where the focus is profit, the important thing is the associate . Everyone has the same rights regardless of how many shares they have.
As with any enterprise, they need to earn a certain profitability to maintain all their costs and expand their capabilities, but there is no concept of profit , but of leftovers , calculated at the end of each year and distributed proportionally to the associates. Even because they are not for profit, these prorated results are exempt from taxes.
Even if they differ from other financial institutions, credit unions also have their obligations to operate. They are part of the National Financial System and are overseen by the Cream Bank, with specialized external audits.
Another point of great credibility and security is that members’ accounts also have protection of up to $ 250,000 in case of demonstration of liquidity problems.
This information brought by the portal economy page of Ig demonstrates the strength of the cooperative credit system in the country:
In Brazil, credit cooperativism is gaining more and more space, and the Cooperative Credit System is the 5th largest financial conglomerate in the country. Currently, there are 243 cooperatives in this segment in the State of São Paulo alone, totaling 1 million cooperative people. . According to information from the Cream Bank, the volume of loans at these institutions grew 8.5% in the third quarter of 2016.
What are the advantages of lending with a cooperative?
All of the differences mentioned result in benefits for members , including the cost ratio of loans. The benefits are:
1. Closer proximity to the financial institution
In credit unions, the associate is not just a customer : he also becomes one of the owners of the business and can participate and vote in meetings. Each member has the right to one vote, which has the same value for all, regardless of the number of shares that each one has.
2. Lower Rates
These institutions offer credit lines with significantly lower interest rates than those practiced by other financial organizations. This is because the values are set according to cost forecast and reinvestment needs.
In addition, they do not usually charge service fees such as transfers and coupon issues. Where there are charges, these are usually lower than those of banks.
Another important point is that, in addition to reduced costs , application yields are almost always higher.
3. Participation in the assessment of leftovers
As already mentioned, members receive a proportional share in relation to the apportionment of the leftovers of funds raised by the cooperatives , which can be withdrawn in cash or reinvested in the institution itself, depending on the agreement that will be made by the members in the assembly.
In traditional banks, which are capital companies rather than people, profits are shared only among shareholders.
4. Social Impact
Part of the funds raised goes to projects aimed at the development of the region where the service points are located, contributing to the reduction of social inequalities.
The performance of cooperatives results in a leveling of competition among financial institutions, as their differences in prices and service make the others need to adapt.
5. Greater accessibility
This topic is the result of the previous ones. Because they have lower costs and differentiated service , credit unions provide access to financial products for disadvantaged groups. In fact, they are increasingly acting in specific niches, such as farmers and micro and small businesses .
As could be seen, these institutions are essentially different from traditional banks. In them, the customer is not just another profit generator, he becomes a member of the business and has an active voice, participating in the decision making of the venture and having the same relevance as everyone else.
Being seen as a person rather than a number, having access to lower rates and prorating surpluses are some of the advantages of borrowing from a cooperative compared to traditional banks, generating not only savings and resource optimization but also social impact. and greater accessibility.
Presol Baser is considered the largest cooperative in Brazil , being a national and international reference in Solidary Credit. It has been in the market for 22 years and has over 200,000 cooperative families in nine states of the country.
Was this article helpful to you? Have you ever wondered about the advantages of a cooperative loan and want to keep learning about credit? Then read our other post for 4 tips on how to make the right loan and make the best use of it in the business. And if you want to know how Presol can help you, click on the banner below!