There comes a time when every company needs to make a significant investment, either to start the business, or to renew machinery, utensils or facilities that help improve its productivity or increase capital. In these cases, it is very common to apply to a financial institution for a replacement credit.
The first thing to be clarified is that a replacement comes from a replacement, which means repair. Thus, a refactional credit is a type of loan that is used for the construction, repair or conservation of a property. Generally, it is usually destined for the livestock, agricultural and industrial sectors.
In the strictest sense of the term, a loan of these characteristics is the one granted for the realization of a work, be it construction, repair or conservation of a property. Likewise, in a broader sense, they are also called refactional loans that come from the amount of the materials that we are going to use in a work, the amount owed by said works or similar concepts.
In other words, if you request a loan of these characteristics, you will have to allocate the amount received entirely to the purchase or rehabilitation of the workplace, the material you need to carry out your activity or all those products that are closely related to the performance of the work. of the company.
Characteristics of the replacement credit
The replacement credits have two fundamental characteristics. On the one hand, we must specify what we are going to use the money for, that is, we must demonstrate to the entity what the purpose of the loan is and what purpose it is going to give that money, for which we will have to present a detailed plan of investment. On the other hand, the product of the loan investment works as a guarantee of it. Therefore, the property that is modified or acquired will function as a guarantee for the loan.
What role does the replacement creditor play?
In the cases in which the refactional credit is granted to carry out the rehabilitation or new construction of a property, the refactional creditor (the one who has granted us the money to carry out the work) has a preferential right to satisfy the credit derived from expenses and fees accrued.
Thus, following the doctrine established by the Supreme Court, the replacement credit is one that is requested to build or repair something, benefiting not only the owner, but also other creditors or those interested in it. Specifically, to the creditor who has executed the building’s own work or supplied fixed elements integrated into the property in question.
Who can apply for this type of credit?
As we saw in previous lines, this type of credit is usually used in construction or in sectors such as livestock, agriculture or industry.
It can be requested by any company that has debts for operating expenses, purchases of real estate or machinery, but as long as these expenses do not exceed one year of seniority. For example, we may request it to pay the expenses of the purchase of goods acquired in the last six months. Companies with tax responsibilities can also benefit from this type of financing.
Installment loan and installments
Spare credits are usually established in the medium or long term for the acquisition or strengthening of fixed business assets, such as implements, instruments, farm tools, fertilizers, land, livestock or livestock. Because this requires large amounts of money to invest, it usually takes a considerable period of time for the business to make a profit on the machinery, property, or improvements made. Thus, normally the financial institution grants up to 70% of the investment and the payment plan is established according to the payment capacity of the company, up to a maximum term of seven years, including the grace period.
Thus, in case we need a more direct investment with more flexible terms, it is preferable to opt for personal loans or quick loans, which allows us to make an immediate investment and establish more repayment terms. according to our needs. This means of financing is the most appropriate in those cases in which we need to make a small investment to improve the performance of the company: acquire computer equipment, change to offices with greater capacity or better communication, or invest in an advertising campaign. In the case of the refactional credit, it would be more limited to the industrial or agri-food sector, both for the amounts of cash handled and for the characteristics of the operation itself.