Business Finance: Are you planning to start your own business or do you want to expand your business? Starting a business involves finding and obtaining financing .
Public aid, loans, crowdfunding, business angels, etc. the sources of financing for companies are numerous. But how to choose the right interlocutor and quickly obtain your financing? How to create your business and choose the appropriate financing? What loans are available to start a business?
Discover in this file a first sample of solutions to finance your business, the conditions for accessing them and their respective advantages.
The personal contribution to the creation of the company is one of the best known and simplest methods of financing to set up. It does not require third–party interlocutors.
It goes without saying that having a minimum of funds (an amount that covers start–up costs) is an asset when you want to create or develop your business , especially if you have to apply for loans. So setting up a business without money is not really feasible. Although some legal forms impose a minimum of 1 euro of share capital, costs will be expected and a certain level of contribution will be essential to ensure the confidence of your future employees.
In addition, it makes the project more credible with potential future donors, suppliers and partners. But the personal contribution is not the only solution to launch your project. Alternative solutions exist.
2. La love money
The love money or literally “the money of love” in French is a source of financing solicited from his family, his friends… The contributions can be substantial provided you know how to sell your project. In addition, the “Madelin” or IR–SME tax niche allows the individual who invests in the creation of a VSE/SME to benefit from a tax reduction of 18% of the amount invested. This tax advantage is a decisive tool of persuasion.
Moreover, this participation of relatives can have a leverage effect with banks . Indeed, it is a guarantee of confidence allowing banks to more easily grant a loan to finance your business .
3. Aid and subsidies
Aid is granted by the State, local authorities (region, department, town hall, etc.) or independent organisations. Thus, there are many organizations or support structures for business creation whose mission is precisely to help you. They are in the form:
medium– or long–term loans or unsecured loans without guarantee, without deposit and without interest (or at very low rates) intended to cover the non–physical needs of a business (initial cash, working capital, etc.). Their reimbursement often varies between 2 and 5 years with the possibility of a 6–month deferral in certain cases. It should be noted that the loan for the creation of companies or PCE to give way on April 1, 2015 to the guarantee creation of the BPI France . ;
tax aid granted by the State;
or suretyship, as is the case with BPI France , which acts as guarantor in favor of the contractor.
Subsidies (research tax credit, innovation credit, European Union subsidies) come from the French government, the European Union or specialized organizations such as foundations.
There are grants for business creation or for existing businesses, under certain conditions. The latter must in particular employ less than 250 employees and achieve a turnover of less than €50 million .
Subsidies differ according to regions and departments. So, for example, if you want to get started in the Paris region, find out about subsidies for business creation in Ile–de–France.
Business start – up grant applications are long and difficult, so be patient. However, their importance for the search for potential investors should not be minimized.
4. Les business angels
The business angel is generally a business executive (active or retired) who decides to invest in a project that he considers viable. In addition to its financial contribution, it provides free management and development advice as well as a large network. As a shareholder, he gets a share in the profits.
The business angel is generally the investor profile for startups . The creation of a startup involves a certain budget . These creation and development costs must be taken into account.
The business angel will obtain a capital participation in exchange for the funds provided. Also note that as a manager or former entrepreneur, the business angel is also an asset for providing advice at the stage of business creation and development.
5. Professional credit
Professional credit is a bank loan intended for professionals (liberal professions, VSEs, autoentrepreneurs, associations, craftsmen, traders, farmers) to cover their needs in:
Equipment: purchase of materials, machines
Real estate: acquisition of premises, offices in future state of completion, land or tax exemption
Cash: working capital, capital increase, takeover of companies
The payment can be made all at once or in several installments depending on the nature of the need. Repayment begins as soon as all funds have been disbursed and can be spread over 10 years depending on the bank. It is always possible to make an early repayment subject to compensation.
Intended for companies already in place , this form of professional credit consists of asking a factor (financial company) to buy the debts of customers in order to have immediate cash. The factor charges a factoring commission (between 0.5 and 2.5%) and a financing commission of up to 3% of the amount of the receivables.
7. Le leasing
Leasing or leasing is a contract that binds an entrepreneur to a leasing company . The latter buys movable or immovable property and the company can use it as it sees fit for a monthly rent. At the end of the contract, the contractor has three choices:
Return the property to the leasing company
Renew the contract
Buy the property by paying the residual value
It is aimed at the entrepreneur who wishes to finance his business to expand his activities, renew his equipment or a vehicle, etc.
8. Le crowdfunding
Crowdfunding or participatory financing consists of raising funds on the internet via a crowdfunding platform (a commission of between 5 and 12% of the amount collected is deducted in the event of success). For a project leader, it allows to collect more or less important sums by limiting risk taking. Depending on the number of contributors, you can already have an idea of the future of your company or your new product. For the contributor, his investment is transparent , in other words he knows exactly what the money is used for. Crowdfunding takes three forms: donation, loan and investment.
9. Le crowdlending
Crowdlending consists of raising funds , still on a crowdfunding platform, in the form of a loan . This form of crowdfunding is the one that has experienced the most impressive growth. It must be said that with an interest rate of around 9%, investors are not lacking.
10. The associate current account
To overcome the lack of liquidity, launch a new activity or extend its corporate purpose, the current account of partners is one of the most advantageous forms of financing for the company . The partners finance it, either by depositing their own funds, or by temporarily waiving their dividends or their remuneration. In both cases, the operation is recorded as a liability on the company’s balance sheet and the interest is deductible from the taxable result.
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