The loan to finance a professional activity is not easy and often, professionals must call on specialists. Read more here
Getting a loan to finance one’s professional activity or future development is not easy. According to the Bank of France, 90% of SME loan applications, TPE at the end of 2014, were motivated by the investment. Professionals often use specialists to assist them in this process.
The professional loan also finances the investment, the activity of the company, the cash, the purchase of equipment, etc.
What are the characteristics of the business loan?
The business loan is granted to entrepreneurs and businesses to finance all their needs. Needs may relate to equipment such as working capital, the purchase of a patent etc. The repayment frequency of this loan is from month to quarter and the rates charged may be fixed, variable, regulated or indexed. The business loan covers expenses:
- short terms (cash …) with a repayment period of one year
- medium term (purchase of productive equipment …) with a repayment term of between 2 and 7 years
The borrower repays the principal of the loan with interest, insurance fees and annexes. All the details are entered in the document of the special conditions of the contract and supplemented by the general conditions of the loan.
What benefits does the business loan provide?
Since cash is essential for the smooth running of the business, the business loan supports the business. When customer payments are late, when sales are down, self-financing resources are exhausted, the company can ask a financial institution or bank:
- a cash facility which is an overdraft authorization that the bank will grant to him
- a discount that the company can obtain by presenting a guarantee attesting to the future payment of the customer.
The advantage is:
- an immediate strengthening of the company thanks to this capital increase. The bank can give you 100% financing, but sometimes there are requirements for equity
- to be able to choose a repayment term and to anticipate repayment
- to be able to deduct the interest on the professional loan from the financial expenses of the company’s income statement
- important flexibility which can lead in agreement with the bank to postpone a payment or to lengthen its duration
- the short-term professional credit granted by the bank is eligible for a tax deduction of these interests.
However, short-term business credit leads to a high cost of agency fees. The cost of the poorly managed loan can lead to the insolvency of the company and cause its bankruptcy.
Businesses with real financial difficulties will find it difficult to finance themselves in the short term.
Which professional loans for which projects?
You can finance with professional credit institutions for development, business support and investment projects.
The professional equity loan is suitable for the purchase of securities, equipment, or the financing of business or working capital.
Mortgage credit or real estate leasing is intended to support the acquisition of real estate assets (offices, businesses …) or to refinance real estate assets.
The medium-term loan is interesting for financing investment projects and increasing your professional activity.
What to provide to have a professional loan?
If you are applying for a professional loan from a bank to invest in strategic business equipment, you will need to provide :
- an estimate of the equipment to buy or a pro-forma invoice in case of purchase already made
- the income statement of the company and your last balance sheet
- the investment financing plan.
In general, the bank will ask you for other documents to properly assess the financial health of your business and its ability to repay the requested loan. In most cases, you will also be asked for guarantees that you have the choice to offer. top