Nearshore Americas

Brazilian IT Provider Enables Credit for Cash-Starved Domestic Firms

Brazil’s key interest rate, determined by the Monetary Policy Committee, is among one of the highest in the world. Popularly known as “taxa Selic,” today it is set at 11.5% a year – but in reality the interest rate paid by business customers can rise much higher than that.

Being able to negotiate better tax rates on loans is always a hard task for entrepreneurs and business managers, especially in the IT industry, which demands high initial and operational investments. That can be an even bigger challenge for small and medium-size companies, due to the high demands they need to meet before applying for a loan.

Looking at this whole scenario, Totvs — one of the biggest Brazilian IT and outsourcing companies — has decided to stimulate its own clients by financing the products they want with much lower rates: 1% a month, which can be paid in installments of up to 36 months.

According to Rodrigo Caserta, Totvs’ client relationship manager, this program makes it possible for its clients to have access to low interest rates without having to go through a maze of demands and bureaucracy.

“In the market there are other funding lines, but they are more restricted and bureaucratic. There are not any that finance services of software implementation like the one we are offering. And being able to access it directly with the company makes it easier,” he says.

This is how it will work, according to information provided by the company: If a small or medium-size client wants to buy software from them, and decides to finance it with Totvs directly, the client has to fill out a form that is then analyzed by a partner financial institution (Totvs did not say which institution that will be) that will determine whether they are able to apply for the loan.

There is neither a minimum amount nor a ceiling value for the financing. After the approval, Totvs will generate a contract and deliver the product or start implementing the service. All that can happen within 24 hours if the financial line is under R$300,000 (about US$170,000). Credit lines above that value may demand further documents and more time, Totvs says.

The products for which these funding lines will be available are: construction, agro-industrial, educational, manufacturing, services, distribution and logistics, financial services, healthcare, and retail.

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It takes an operation the size of Totvs to be able to support the costs of such an idea. Totvs is reported to have 48% of market share domestically and 34% in Latin America. The company is also the sixth largest ERP provider in the world; within that segment just inside Brazil’s borders, it has about 26,000 clients, which in great part is composed of small and mid-size companies.

This article originally appeared on Sourcing Brazil



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