• Published in December 06, 2024 18:15 inEconomy

FIDC and Business Credit Solutions: How Silveira Capital Can Help Your Company Secure Capital

Introduction

In the dynamic Brazilian financial environment, where companies face increasing challenges to maintain liquidity and support growth, structured credit solutions stand out as essential tools for sustainability and business expansion. Among these solutions, the Credit Rights Investment Fund (FIDC) plays a crucial role in providing businesses with swift and efficient access to capital by converting receivables into immediate liquidity.

An FIDC is a financial structure that enables fundraising through the assignment of credit rights—such as invoices, rental agreements, loans, and other receivables—to an investment fund. Investors purchase shares of this fund, generating liquidity for the companies transferring their credits. This operation is particularly advantageous for companies with illiquid assets, offering competitive rates and financial flexibility.

The Importance of Structured Credit Solutions

Solutions like the FIDC address a growing demand for alternatives that go beyond traditional banking financing models. The advantages include:

• Reduced Cost of Capital: Companies can access resources at more attractive rates compared to conventional credit lines.
• Liquidity and Flexibility: Converting receivables into immediate capital allows companies to maintain healthy cash flow, essential for daily operations and strategic investments.
• Customization: Various types of FIDC—open-ended or closed-ended—enable solutions tailored to each company’s specific needs.

In the current scenario, marked by economic uncertainties and constant market changes, the FIDC has become a reliable alternative for companies seeking to optimize resources without compromising financial stability.

Silveira Capital: Your Partner in Structuring Credit Operations

Silveira Capital positions itself as a strategic partner for businesses requiring efficient and well-structured financial solutions. Our expertise includes detailed analysis of each client’s specific needs, organizing financial data, and identifying the best market conditions for fundraising. We collaborate with fund managers, administrators, and investors to ensure:

• Competitive Rates: Negotiating favorable conditions to reduce financial costs.
• Process Agility: Facilitating the presentation of documents and information, simplifying approvals with financial institutions.
• Tailored Solutions: Every operation is planned to align with the company’s short- and long-term objectives.

At Silveira Capital, we understand that every company is unique. We offer a personalized approach to structuring the ideal credit operations. Our network of reliable partners and negotiation experience guarantees results that drive sustainable growth for our clients.

Want to know how an FIDC or other structured credit solutions can benefit your company? Contact Silveira Capital and discover how we can turn financial challenges into growth opportunities.

What is an FIDC?

Credit Rights Investment Funds (FIDCs) have become an efficient and accessible solution for companies looking to convert illiquid assets, such as receivables, into immediate financial resources. But what exactly is an FIDC, how is it structured, and what are its benefits? This chapter provides details to clarify how this instrument works and can benefit businesses across various sectors.

Definition and Structure

An FIDC is an investment fund regulated by the Brazilian Securities and Exchange Commission (CVM) and designed to acquire credit rights, which represent amounts receivable from third parties. These rights can include:

• Commercial invoices.
• Rental or financing contracts.
• Promissory notes and checks.
• Credit card receivables.

The structure of an FIDC comprises three main participants:

1. Assignors: Companies that sell their credit rights to obtain immediate liquidity.
2. Investors: Individuals or institutions that purchase fund shares and, in return, receive returns based on payments from the acquired credit rights.
3. Drawee: person who acquires a product or service through payment of a bill or invoice related to the purchase of that product or service.

Types of FIDC

FIDCs can be classified into several main formats, depending on the needs of the investor and the assignor company:

• Open-ended FIDC: Allows share redemptions at any time, offering greater flexibility for investors.
• Closed-ended FIDC: Has a defined redemption period, typically tied to the maturity of the acquired credit rights, making it ideal for medium- and long-term operations.
• Multi-Assignor FIDC: Accepts credit rights from multiple companies, diversifying fund risks as rights originate from various sources.
• Multi-Payor FIDC: Acquires credit rights from different payors (debtors), ensuring risk diversification by including receivables from various counterparts.
• Exclusive FIDC: Structured to cater to a single assignor company, often designed to meet specific needs.

Benefits of FIDC

The advantages offered by FIDCs extend beyond simple fundraising. They are designed to provide tailored financial solutions for companies and attractive returns for investors.

1. Lower Cost of Capital: Compared to traditional bank credit lines, FIDCs often offer more favorable conditions, with competitive interest rates adjusted to the risk of the assigned receivables.
2. Liquidity for Illiquid Assets: Companies with significant receivables can convert these assets into immediate cash, improving cash flow and operational flexibility.
3. Investor Diversification: By acquiring shares from different investors, FIDCs allow companies to spread risk, increasing the security and predictability of receivables.

How It Works in Practice

The FIDC process can be described in three main steps:

1. Assignment of Credit Rights
• The assignor company transfers its receivables to the FIDC, which assumes ownership of these assets. In return, the company receives the corresponding value, typically at a discount, depending on credit quality.
2. Investor Share Acquisition
• Investors purchase fund shares, diversifying their portfolios with exposure to assets based on cash flows secured by contracts and commercial operations.
3. Management and Administration
• The fund is administered and managed by specialized institutions, such as fund managers and banks. These entities are responsible for:
• Assessing the quality of credit rights.
• Collecting payments from debtors.
• Distributing returns to investors.

Example in Practice

Imagine a retail company with BRL 10 million in accounts receivable from corporate clients. By assigning these credit rights to an FIDC, the company can immediately receive BRL 9.5 million (considering a discount for investors). This amount can be used to:

• Purchase inventory.
• Invest in marketing.
• Expand operations.

Meanwhile, fund investors receive the original value of the receivables (BRL 10 million) over the agreed term.

Role of Administrators and Managers

The success of an FIDC depends on the expertise and diligence of the institutions that administer and manage it:

• Administrators: Ensure legal and regulatory compliance, protecting investor interests.
• Managers: Evaluate and select the credit rights to be acquired by the fund, ensuring portfolio quality and diversification.

These entities play a crucial role in risk mitigation and maximizing returns for both assignors and investors.

Other Business Credit Solutions

In the modern financial landscape, in addition to FIDCs, various structured credit alternatives enable companies to efficiently raise capital, adapting to their specific financial needs. These instruments include structured credit operations, bond issuance (debentures), and the use of Real Estate Receivables Certificates (CRIs) and Agribusiness Receivables Certificates (CRAs). Below, we explore how these solutions benefit companies.

Structured Credits

Definition:
Structured credits are customized operations designed to meet specific needs, such as working capital, expansion, or debt refinancing. They are often secured by tangible assets (real estate, machinery) or intangible assets (brands, contracts).

Advantages:

• Flexibility: Allows companies to leverage difficult-to-liquidate assets as collateral for accessing credit.
• Customization: Payment terms, interest rates, and schedules are tailored to meet the client’s specific needs.
• Risk Mitigation: For lenders, secured assets reduce operational risks.

Debentures

Definition:
Debentures are debt securities issued by companies to raise funds directly from the capital markets. The issuer agrees to pay investors principal and interest over a predetermined period.

Types of Debentures:

• Simple Debentures: Do not provide tax incentives but are widely used for medium- and long-term funding.
• Incentivized Debentures: Target strategic sectors, such as infrastructure, offering tax exemptions (e.g., income tax exemptions for individual investors).

Advantages:

• Diversification: Expands funding sources, reducing reliance on bank credit lines.
• Competitive Terms: Often offers lower costs compared to traditional loans.
• Extended Maturity: Ideal for long-term projects.

Real Estate and Agribusiness Receivables Certificates (CRIs and CRAs)

Definition:
CRIs and CRAs are securitization instruments where future cash flows from contracts (e.g., rental agreements, agricultural financing) are converted into tradable securities.

• CRI (Real Estate Receivables Certificates):
• Focused on the real estate sector.
• Backed by receivables from sales contracts, leases, or real estate financing.
• CRA (Agribusiness Receivables Certificates):
• Focused on the agribusiness sector.
• Backed by receivables from agricultural operations, such as exports or equipment financing.

Benefits:

• Tax Incentives: Income tax exemption for individual investors.
• Access to Capital Markets: Provides medium-sized companies access to sophisticated financing sources.
• Investor Appeal: Sectors like real estate and agribusiness attract high demand from investors seeking stable and predictable returns.

Solution Comparison

How Silveira Capital Operates

Silveira Capital plays a strategic role in helping companies structure and execute business credit operations. Our approach combines organization, expertise, and an extensive network of financial partners to offer efficient, tailored solutions, optimizing costs and fundraising timelines. Below, we outline how we operate at each stage of this process.

Structuring and Organization

The Role of Silveira Capital in Structuring Operations
Structuring a credit operation is a complex process requiring meticulous planning and a clear presentation of financial information. Silveira Capital begins each project with an in-depth analysis of the client’s specific needs and characteristics, focusing on creating solutions that are feasible and attractive to both lenders and companies.

Organization and Documentation Preparation
Clear and precise financial data presentation is critical for credit operation approval. Silveira Capital assists clients by:

• Detailed Financial Analysis: Identifying strengths and making necessary adjustments to submitted data.
• Document Preparation: Ensuring that financial reports, projections, and contracts are formatted professionally and consistently.
• Risk Mitigation: Anticipating potential lender objections and adjusting documentation to meet required criteria.

Network of Partners

Strategic Collaboration with Financial Institutions
Silveira Capital collaborates with a vast network of partners, including fund managers, administrators, and institutional investors. These established relationships allow clients to access a variety of solutions under favorable conditions.

Reducing Costs and Optimization

Negotiating Favorable Conditions
One of the key advantages of working with Silveira Capital is our ability to negotiate advantageous conditions with lenders. Using our market expertise, we:

• Lower interest rates.
• Extend repayment terms.
• Minimize required guarantees.

Use Cases and Examples

Mining: Working Capital and Industrial Expansion

Challenge:
A Brazilian medium-sized mining company sought alternatives to meet two critical demands:

1. Working capital for operational growth.
2. Investment in new equipment and an industrial plant.

Solution:
Silveira Capital structured secured credit operations and a multi-assignor FIDC to meet both needs.

Agribusiness: Receivables Advances with FIDC

Challenge:
A supplier of agribusiness inputs faced challenges financing operations due to delayed client payments.

Solution:
We established a FIDC to advance receivables, securing liquidity and stability for the company.

Family Group: Debt Restructuring

Challenge:
A diversified family business struggled with debt and underperforming assets.

Solution:
Silveira Capital renegotiated debts, facilitated asset sales, and restructured the group’s financial liabilities.

Final Considerations

The financial success of a company largely depends on its ability to access the capital needed to sustain operations and fund growth. In today’s competitive landscape, structured credit solutions like FIDCs, secured credits, debentures, CRIs, and CRAs provide efficient and flexible alternatives for maximizing financial resources.

Summary of Benefits

• Immediate Liquidity: Address urgent demands and seize strategic opportunities.
• Reduced Capital Costs: Access financing under more favorable terms than traditional loans.
• Flexibility and Customization: Tailored operations for short-, medium-, or long-term needs.
• Resource Diversification: Access to sophisticated financial instruments like CRIs and CRAs.

Why Choose Silveira Capital?

Silveira Capital has a proven track record of transforming financial challenges into sustainable growth opportunities.

Distinct Advantages:

• Expertise in structuring efficient operations.
• Personalized solutions for unique client needs.
• Strategic partnerships with diverse financial institutions.
• Streamlined processes for quicker approvals and fewer bureaucratic hurdles.

If your company is seeking capital to grow, restructure debts, or enhance financial management, contact Silveira Capital. Together, we can build solutions tailored to your goals and position your business for lasting success.

References

• ANBIMA: Regulations on FIDC, CRI, and CRA.
• CVM: Rules on investment funds and debentures.

Disclaimer:

The information provided in this article is for informational and educational purposes only. It does not constitute financial, legal or accounting advice and should not be used as a substitute for consultation with qualified professionals. Silveira Capital is not responsible for any decisions made based on the information contained in this article. We recommend that you seek personalized professional advice before making decisions related to company valuation or financial transactions.