The company needs to constantly finance various investments: a business fund when creating or expanding the business, a buy-back of corporate shares, professional equipment, vehicles intended for the operation of the business. …
The Characteristics of a Business Loan
Among all the financing offers offered by the network of traditional banks, loan institutions and other specialized institutions, various modes of professional loan are possible.
In order to consider the best financing solution, some essential information is to be collected:
- the global effective interest rate (APR) which includes all bank charges
- personal security: bail
- real securities: pledges on movable assets such as pledges or mortgages the contribution in own funds the market conditions:
In some cases, a medium or long-term bank loan may be attractive with a fixed rate, revisable or revisable cap (guaranteed ceiling rate)
In terms of granting loan to companies, each bank and specialized financial institution has its own offers (interest rate, repayment period …).
Business loan, also known as professional loan, is mainly intended for artisans, tradesmen, VSEs and the liberal professions, but all professional structures can use it.
The Different Types of Business Loan
Many financing solutions are available to businesses. it is possible to classify them according to their duration or the goods to be financed:
The cash facility : granted by the bank for a few days of overdraft (payment of wages, VAT etc …)
The bank overdraft : permanent cash facility for a commission and negotiated with the banker. To use when cash is well controlled.
Loans by Signature
The Deposits :
All companies receiving VAT can use it. For cash requirements , the bank may, in certain cases, be a guarantor to the tax authorities, which allows a delay of 4 months in VAT refunds. The bank is also surety in other situations (certain customs duties or registration fees when buying buildings for example). Other types of deposits exist: reimbursement of down payments in the event of customer deposits paid, guarantees of retention of security in the building sector, financial guarantees of real estate agents, legal advice …
The documentary loan:
The bank undertakes to guarantee the importer the payment of the goods for export in exchange for documents certifying the shipment and the quality of the goods. The disadvantage is that the company pays a commission even in case of non-use.
The pre-financing loan to finance the operating cycle:
Advances on goods (loan on pledged stock, mobilization of claims born abroad …). This type of loan can reach 100% of the overdraft, lasts the time of the overdraft and its cost is linked to the money market rate.
The Loan Mobilization of the Receivables
The company transfers its bills of exchange to the banker (bills of exchange, promissory notes, etc.), which pays him an amount deducted from the outstanding agios. The discount remains a binding procedure since the debtor customer must sign the bill of exchange. In the event of a payment incident by the debtor, the bank may turn against the company.
The bank and the company sign an agreement and the latter gives the banker a statement of assignment of the receivables and the double of the invoices concerned.
Factoring or Factoring:
Financing technique exercised by a factor (financial company) within the framework of a convention. The factor buys the receivables from the company that wants cash on payment of a commission and the constitution of a deposit. The financial company is responsible for the recovery of trade receivables and can guarantee the company coverage up to 100% of the amount of its claims via loan insurance. This financing solution remains more expensive than a conventional loan, a large flow of receivables to be recovered is desirable.
Medium and Long Term Loan
With a duration of 2 to 7 years. medium-term loan concerns medium-term investments (industrial and agricultural equipment, etc.) and requires a contribution. In general, the amount of loan granted is between 50% to 75% of the amount of the investment.
Long-term loan is for a period of 7 to 20 years and is often financed by a specialized financial institution that finances loan by mobilizing the resources of bonds. This is the ideal loan for financing professional real estate.
Leasing or Leasing
The lease of furniture :
The company chooses a piece of equipment and has it financed by a bank or a specialized loan institution that owns it. The latter pays the suppliers and leases the property to the company that pays rent.
Several options are available at the end of the contract: either acquire the equipment at a residual value by lifting the purchase option, or return the equipment or continue to rent the property by paying reduced monthly payments.
This financing technique is ideal when hardware obsolescence is fast (IT, office automation, etc.), and rents paid by the company do not appear on the balance sheet. They are recognized in operating expenses. Learn more about car leasing
Real estate leasing :
Financing solution that allows a company to rent the premises it occupies for professional use. It has the possibility to purchase it at the end of the contract.
The lease-back :
Technical refinancing of invoices of equipment already paid. The bank or specialized loan institution pays the company the amount of the invoices paid at a refinancing rate and a commission.
Other Types of Loan
Supplier loan: loan granted by the supplier under a commercial contract by negotiating payment terms (30, 60, 90 days …)
The tax loan: reimbursement by the tax authorities of the VAT paid but not paid according to a scale. A company in difficulty of cash can make the request.
The campaign loan: is for companies that have a seasonal activity. It makes it possible to sustainably finance operating needs not covered because of fluctuating cash flow.