Acquiring a loan for your French company
Do you want to get a bank to grant you a loan for your business creation project? In France, regulation can make banks very reluctant to grant loans, so that can be very difficult without any help. Thankfully though, in these cases, guarantee institutions can be life-savers.
Summary:
- What exactly is a guarantee institution?
- Are there different types of organizations or devices?
- Who should I contact?
1- What exactly is a guarantee?
A guarantee institution basically functions as insurance for the bank if the borrower can’t pay back his loan. That way, the losses incurred by the bank can be limited. Though, of course, either the bank, the borrower, or both have to pay the guarantee institution. However, this doesn’t only help the bank; it can also help you, as a borrower, as well:
- For the bank, the advantage is obvious. With a guarantee, the bank risks significantly less, so it’s easier to grant a loan.
- Though, there is an advantage for you as well, though it’s harder to notice. Indeed, the bank will still turn to you first if you fail to pay back your loan. The insurance company will only pay the bank if all the assets the bank seized aren’t enough to remove your debt. However, because banks already have a safety net, they won’t ask you to give quite as many personal guarantees, so you might not have to risk all of your assets.
2- Are there different types of organizations or devices?
The creation guarantee of BPI France:
BPIFrance guarantees between 50% and 70% of loans granted to new entrepreneurs. You can make use of this system if your company is less than 3 years old, and you want to:
- Create a new company
- Build the first facility of a buy-out
- Have an existing business create a new company to develop new activities or products
It also guarantees bank loans for funding material and intangible investments, acquisitions, the Working Capital Requirement (WCR), etc.
The way it works for business creation projects is as follows:
- If the loan represents less than 200 000€, partner banks can decide themselves to offer “creation” loans with the guarantee of BPI France. Up to 70% of this amount is covered.
- If the loan represents more than 200 000€, banks can ask BPI France to guarantee up to 60% of the amount of the loan, as long as it doesn’t risk more than 1 million euros by the borrower.
Guarantees offered by France-Active
The purpose of this institution is to make it easier for people to have access to loans in good conditions, and to protect entrepreneurs. As such, it intervenes to limit or prevent entrepreneurs from having to give their personal guarantee. You can thus ask for such a guarantee if you:
- Are the creator of a small business and are self-employed, or create your company in a “fragile area” (suburbs or rural areas)
- Create a company with a social, environmental are territorial impact.
- Create a Solidary or social company
They also offer so-called “garanties EGALITE” (equality guarantees). These are for:
- Women who want to become self-employed by creating their company or taking one over
- Entrepreneurs in fragile areas
- Business creators in a precarious state who want to find employment by creating or taking over a company
For these people, France-Active can cover up to 80% of the loan, and prevent them from giving a personal guarantee.
Departmental or regional guarantee funds:
These are created by local authorities, so each has its own terms.
Mutual guarantee companies:
These institutions are partnerships. They act in two different ways to make sure their members have a banking guarantee:
- By adding a guarantee when the borrower takes out a loan
- By giving an additional guarantee to the bank itself
Some of these companies, like the Siagi, are partners of nearly all banking institutions. This one, in particular, is also a partner of BPI France, and they’ve got an agreement allowing them both to guarantee loans designed to fund investments of local crafts and outreach activities.
Others, such as Socama, only intervene with one bank in particular. In this case, it is the Banque Populaire.
3- Who should I contact?
In most cases, banks are the ones who decide whether to make use of these companies or not. However, you can still contact these organisms directly to ask them if they can fulfill your demand.