Guillermo Jiménez
Director General
ProCrédito
/
View from the Top

Companies Must Learn to Trust, Use Credit

By MBN Staff | Tue, 01/01/2019 - 16:41

Under the new conditions established by USMCA, more companies will have to participate in automotive manufacturing activities for OEMs and Tier 1s to comply with stringent rules of origin. Financing will be key for small players to grow their operations enough but they must find an adequate solution depending on their operations and payment capabilities, says Guillermo Jiménez, Director General of ProCrédito. “Credit is not evil,” he says. “Credit is good, especially considering that the most expensive money is that of the company itself.”

Although most companies not familiarized with financing solutions might think there is no such thing as flexible credit, Jiménez says ProCrédito developed its product portfolio with this idea as a cornerstone. The company analyzes its clients’ cash-flow cycles and based on that it determines the most efficient payment conditions for a credit that can range between MX$200,000 (US$10,400) and MX$6 million (US$310,000). The key, however, is for companies to know how much to ask for.

“Companies must learn to not ask for more than what they can pay,” says Jiménez. “Businesses tend to suffer when they owe more than their normal cashflows, which is why one of our policies is to never loan more than what the company can pay, even if it might be good business for us.” Jiménez has also found cases when companies are reluctant to ask for a loan, especially when clients are comfortable with their level of operations and are not overly used to credits. That is when ProCrédito’s advisory services come into play, allowing companies to understand which financing scheme best suits them.

Jiménez says ProCrédito wants to become the go-to financing company for Tier 3s, Tier 4s and service players that support the growth of the automotive industry, such as transportation and logistics companies. This segment already represents 53 percent of ProCrédito’s business and Jiménez sees even more room for expansion. “There are many companies wanting or already participating in these market segments, which means there is great demand for our services,” he adds.

The company currently has six branches located in the Bajio, with a stronger presence in the cities of Leon, Queretaro and Aguascalientes. As a result, ProCrédito has natural access to the growing potential of the region’s automotive sector. “We have made manufacturing companies a priority in our development strategy for the next four or five years,” says Jiménez. “We operate in an especially favorable area for the automotive industry and we want to increase our penetration among small suppliers.”

During the first half of 2018, the company faced some challenges due to the uncertainty caused by the renegotiation of NAFTA and the presidential elections on July 1. Increases in inflation and interest rates also made companies hesitant to acquire new financial products. However, after the election of Andrés Manuel López Obrador and the USMCA agreement, companies in the Bajio gained economic certainty, leading to more opportunities for growth. Furthermore, López Obrador’s commitments as the new president mention a focus on SME development, particularly in key sectors such as automotive. “We see a great opportunity in the new government’s goal to foster growth of SMEs in Mexico,” says Jiménez. “As an independent financing company, we have enough flexibility to target the semiformal economic segment.”

The storm may have passed in terms of uncertainty but Jiménez says there are still challenges ahead for ProCrédito, mainly in terms of assessing clients correctly and being sure they will be able to repay their loans. The lack of certified information on clients forces the company to analyze businesses independently and to create a financial statement based on different factors to understand if the company is capable and willing to pay off a loan. According to Jiménez, in this sector payment formality is not the norm either. “There are clients that do not care if their due date is today and they miss it,” he says. “We must remind them constantly of their obligations and we have created several mechanisms so our people are in constant communication with clients either by phone or at their facilities.”

For Jiménez, this is a cultural problem since many companies see financial entities as just another provider. “They must realize that when it comes to providing money, schemes cannot follow a 90-day payment plan,” he says. “We have managed to improve our past-due portfolio but there is still much work to do.”

Photo by:   MBP
MBN Staff MBN Staff MBN staff