Companies Credit Simulator

Note: the results are merely indicative and do not represent a guarantee for granting credit.

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Medium to Long Term Credit (MLP Credit)

This is the most traditional bank financing practiced by the Banks. It is an agreement between a Credit Institution and a Company, in which the first one grants a certain amount as a loan to the second one, which assumes the responsibility for its reimbursement plus the respective interest, charges and taxes.

Form of financing for the businesses, which may have the purpose of supporting investments resulting from the business activity (expansion projects, modernization, development, ...), or to reinforce the company's own liquidity (working capital).

 

The term of the operations, as the name indicates, varies from 1 to 15 years, depending on the purpose, nature of the investment, guarantees, and risk of the company, although there is a concerted tendency on the part of the Banks not to exceed 10 years in most operations.

 

In order to adjust the debt service of the financing to the capacity to release funds of the underlying project, or of the Client itself in general, whenever justified, and if the financing Credit Institution so agrees, the credit operations may also incorporate a period of:

• Capital Grace Period, where the Client only pays the interest due, with no obligation of amortization of the financed capital by the Client. Usually applied in start-up or expansion projects, in order to guarantee the necessary time for the company to properly implement the means in the productive system, or to position the project in the market. This Grace Period may also take on an absolute form - Full Grace Period, where not only the Client does not bear any capital amortization but also does not bear the liquidation of the respective overdue interest and eventually commissions. Option used/accepted by the Bank, only in highly exceptional and extraordinary situations, as was the case of the Legal Moratoria recently applied as an example. It is important to emphasize that in this case the interest is capitalized, which in practice implies an increase in the financed capital.
• Use of Capital Period, where the financed amount is released in tranches, contrary to common practice where the financed amount is fully made available to the Client upon contracting. Usually practiced in construction projects, or of another progressive nature, where capital is released depending on the evolution of the work (pari-passu), and by carrying out inspections to the site;
• Capital Deferral Period, where part of the financed amount is transferred to the end of the contract, in order to reduce the amortization effort during the life of the operation. Usually linked to an extraordinary, secure revenue stream (eg sale of mortgaged property).

 

Advantages

• Greater contractual flexibility of the operations when compared to other types of financing usually practiced on the market;
• Possibility to adjust the operation's debt service to the inherent characteristics and cash-flows of the underlying project;
• Reduction of exchange rate risk, through the possibility of financing in Foreign Currency, allowing to protect/mitigate the risk inherent in certain investments;
• In real estate, as mortgage credit operations, IMT is not applicable (if the property is obviously already under the Client's ownership), as it happens in leasing operations, since the asset remains in the possession of the proponent. Especially relevant in construction projects where the land has already been acquired by the proponent.

Disadvantages

• ISUC - Stamp Duty on the Use of Credit, which is applied directly to the amount of financing used, and is not applicable to other types of financing such as leasing;
• Amortization period in terms globally inferior to those usually practiced in leasing (especially in the real estate segment).