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Acquiring loans for your business: Best Alternatives to Bank Loans

Seeking credit is part of the life of the entrepreneur, to invest or to finance the need for working capital and in particular stocks. It is sometimes the obstacle course with traditional establishments.

The takeover or development of a business, including farming, is sometimes faced with the difficulty of obtaining a bank loan. Other sources of funding can then be explored.

Do you want to start your business or expand and are having trouble getting a loan from your bank? There are other ways to get funding! Business angels, crowdfunding, microcredit, etc. Overview of alternative solutions.

It is often the first idea when you are looking for financing: to appeal to your relatives. These funds collected from family members, friends and other relations are called love money   (“money from the heart” or “proximity capital” in French). They allow you to benefit from tax exemptions or reductions.

In the family context, the recipient of a donation can indeed receive up to €31,865 without having to pay duties. On condition that:

  • the donor is under 80
  • whether the beneficiary is their child, grandchild or great-grandchild (or nephew or niece if the donor has no descendants)
  • whether the beneficiary is an adult or emancipated.

This donation must be the subject of a notarial deed, a private deed or a declaration of donation. The beneficiary must notify his public finance minister within one month.

  • Honor loans

If your search for financing concerns the creation or takeover of a business, or if you are a young manager, you can turn to a loan of honor. It is a loan without guarantee or personal guarantee, generally at zero interest, and registered in equity. Its amount can reach €90,000 for innovative projects.

Obtained after selection and passage in front of a jury of professionals, honorary loans can also bring a gain of credibility to your project and facilitate the obtaining of bank financing. “The loan of honor has a significant leverage effect”, assures Initiative France. “For €1 of loan of honor, the banks grant on average €7.5 of additional financing.".

  • Microcredit

Designed specifically for people who have difficulty accessing bank financing, microcredit aims to create, take over or consolidate a business. The goal: to enable project leaders to create or sustain their own jobs. In addition to the loan, this system is accompanied by beneficiary monitoring: assistance with administrative procedures, help with cost control, business development, etc.

Microcredits are generally offered by associations. For example, Adie offers a financing plan that can go up to € 20,000 through microcredit (up to €10,000 ), supplemented by a loan of honor or public assistance, for example. The granting of a microcredit is based on several criteria:

  • the project leader: motivation, experience, skills, etc.
  • the project: location, potential, forecast turnover, etc.
  • repayment capacity.
  • Crowdfunding

Participatory financing or crowdfunding is a financing mechanism that makes it possible to raise funds from a large public in order to finance a creative or entrepreneurial project, which most often works via the Internet. This funding can take three forms:

  • a loan
  • the subscription of equity or debt securities issued by the supported company
  • a donation or contribution that may give rise to consideration.

If you turn to a crowdfunding platform by loan (with or without interest) or by subscription of financial securities, it must necessarily justify a regulated status:

  • participatory investment adviser (CIP) or investment services provider (PSI) approved by the Authorities responsible for the subscription of securities
  • crowdfunding (CFI) intermediary for loans.

You can identify the sites with these statuses thanks to the label “Crowdfunding platform regulated by the French authorities”.

  • Incubators

Incubators are support structures for business creation. By approaching an incubator, you can get support in carrying out your entrepreneurial project for a period of 1 to 3 years. While incubators are known for their missions of helping and advising entrepreneurs, they can also put you in touch with investors wishing to participate in the capital of your business.

The nature of incubators is diverse. These may be public or private structures, attached to major schools or local authorities, as well as to large-scale companies.

On the internet, it is possible to find free sites that offer directories of incubators, to which you could apply to support your project.

  • Business angels

If your company has strong growth potential, it may interest business angels. Behind this term are natural persons, often former senior executives or entrepreneurs themselves, who wish to invest part of their financial assets in innovative companies. Thanks to their experience, business angels also provide advice and an address book.

Business angels select their project carefully, focusing on the potential success of the project. Fundraising can therefore be spread over a year.

  • Investment funds

Nearly 300 investment funds are grouped in France within the Association of Investors for Growth. These are professional shareholders who take a majority or minority equity stake in companies that are generally not listed on the stock exchange. "[They] participate in the definition of a clear and long-term strategy for the company, allowing it to create value for its customers, its shareholders and its employees", underlines the association.

This investment capital activity can intervene on 5 aspects:

  • the creation of companies and the financing of new technologies (capital-innovation)
  • growing companies with high development potential (development capital)
  • the acquisition, transmission or sale of companies (transmission capital)
  • takeover of companies in difficulty (turnover capital)
  • the financing of infrastructures, such as telecommunications or public road equipment (infrastructure funds).

Private equity players inject an average of €5 million per company, and rarely less than €250,000, during a partnership that generally lasts 3 to 7 years. In 2018, they thus invested nearly 15 billion euros in order to finance more companies, including 75% of SMEs, according to figures from Afic.

  • Inter-company loans

Who better than another company to understand your cash flow needs? Since the law for growth, activity and equal economic opportunity companies have the possibility of being creditors or debtors of each other. Limited liability companies and joint-stock companies can now lend funds to microenterprises, SMEs or medium-sized enterprises (ETI). On a few conditions:

  • lending companies must only make this loan as an accessory to their main activity
  • loans must not exceed a duration of 2 years
  • the loans granted must take the form of a loan agreement
  • companies must be able to certify an economic link (direct or indirect subcontractor, same economic interest group, same group awarded a public contract, etc.) justifying the credit.
  • Competitions

Many associations, foundations, schools or other organizations of entrepreneurs offer competitions for creators or new entrepreneurs. They are sometimes intended for specific audiences (female entrepreneurs, young people, regional competitions, etc.) or defined sectors (digital, ecology, trade, social and solidarity economy, etc.). The key: financial allocations, but also the possibility of making themselves known and meeting partners or investors.


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