French Business Financing

All lenders make a big distinction between retail lending, such as mortgage lending for house purchase (which may have home income potential) , and commercial lending.

Simply, the distinction is that for a French home or home and business mortgage (more details here) you need to show that you can repay your mortgage (at least initially) from income that is generated from sources other than the property on which your French mortgage is secured.

If you need Business Finance for a project which will be the source of income for the repayments then French Home and Business Mortgages are not the answer and you should be looking for commercial finance.

To obtain French Business Finance you will need to make a very strong case that the business will be viable in your hands and at a minimum you will need to produce the following:

• A concise executive summary of the project.
• A description of the business and how it will operate.
• An introduction to the management team and job profiles for any staff to be hired.
• A detailed and realistic marketing and sales plan to demonstrate the business viability.
• A competitive analysis against any businesses in the same addressable market or locality competing for the same customers.
• A detailed and realistic 5 year projection of revenue and expenses (Year 1 by month, year 2 by quarter, years 3, 4 & 5 in summary).
• A 5 year profit and loss projection
• A 2 year cash flow forecast
• A basic source and application of funds statement
• A detailed project plan showing the project milestones.
• Proof that all planning permissions and commercial agreements can be put in place as a pre-condition of funding.
• 5 years historic statutory accounts demonstrating the businesses’ performance unless it is a new business.

Commercial finance broadly comes in three forms, commercial mortgages, commercial lending and venture funding. We suggest you think hard about your funding needs before choosing which financing route to follow.

Perhaps surprisingly, it is often be harder to obtain funds for small projects than for large ones and a number of our lenders set their minimum facility level at £12 million up to a maximum of around £200 million..

We have an excellent network of contacts in the commercial finance sector and we will be delighted to help if your proposition is truly commercial and you can prove it to be "bankable". We also now feature a list of current and bankable French Businesses For Sale on our blog here to help you find that rare commodity, a profitable and bankable French Business For Sale.

Because obtaining French business finance is not always easy we recommend you contact us via the Act Now tab on this page to discuss your needs and to give us an early opportunity to clarify your financing objectives.

About Commercial Mortgages

French business mortgages are, in the main, structured very similarly to retail mortgages:

• A Loan to Value ratio condition.

(For a retail mortgage the LTV ration should be normally less than 80%. For commercial mortgages the LTV ratio is generally negotiable depending to the financial position of the business.)

• A Minimum sum requirement.

(For a retail mortgage the minimum is usually around €75,000. For commercial mortgages the sum depends on the lender but is usually higher, perhaps above €1,000,000)

• An Income multiple condition.

(For retail mortgages this is normally around 3 times income. For commercial mortgages this will be a multiple of provable secure income unless the commercial mortgage is a very small percentage of the offered collateral.)

• Total structured indebtedness.

(For retail mortgages this is usually less than 30% of disposable income after the addition of the proposed financing. For commercial mortgages there will be an indebtedness condition, but it will be variable depending on the capital structure of the business.

I some cases, usually commercial equity release or refinancing, the funder may recommend a form of Buy and Leaseback arrangement in preference to a commercial mortgage. There are probably more sources of commercial Buy and Leaseback funds than there are sources for commercial mortgages.

Commercial Lending and Venture Funding

In this market it is assumed that the financing can almost never be repaid from income.

The most common scenarios, assuming you are not of Public Limited Company status, are:

• A revolving loan facility, under which the financing becomes a substitute for working capital and is guaranteed by tangible assets.

• Equity participation with a tied financing facility, under which the financing is secured on the value of the business.

• Venture capital, under which finance is made available against equity participation with the assumption that the financier will sell their equity on the open market within a determined period of time.

• Expansion of the equity base to include new investors who may or may not be active within the business.

In all cases the financier's tests will be thorough, verging on the severe, because the sums at risk are substantial, usually between £1-200 million, and you will be dealing with financial professionals. Unlike the days leading up to the 1998 - 2001 dot com bubble, the capital markets are now siding with Warren Buffet and no longer prepared to invest in business plan proposals with no track record.

With lending of this type you need to prove your business case, demonstrate your skill and experience, validate your case with a proven track record of success and convince the financier of the business value of the proposition.

We can help you prepare your funding case, systemically evaluate and reduce the risk inherent in your business plan and introduce you to potential financiers if your business case meets the stringent criteria of commercial finance.

Characteristics of a Bankable Proposition

• Proprietary know-how that creates a barrier to entry for others.

• The potential for scalability to global markets.

• A business model generating significant recurring revenues.

• A CEO and management team which includes industry-relevant senior executive(s)

• A compelling USP such as possession of robust intellectual property.

• A unique or compelling location, site or asset.

• A business that competes more on value provided to customers than price.

• The possibility of growth via acquisitions and/or corporate investment.

• A business strategy that will be attract trade buyers and investors in the public equity markets.

You may not have all of the above in place but you will need to have most of them covered or a clear strategy for overcoming their absence.

E-mail us your message

Could you contact me at the earliest opportunity because I have a need for business financing in France that I would like to discuss with you. (Please do not include commercially confidential information below. A very short description of what you need will be sufficient to enable us to begin discussions.)

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