Understanding French business finance isn’t difficult, but it does require thinking through what you can and can’t reasonably borrow for your business from a banker’s point of view.
In general terms, lenders will be concerned to establish three things:
- That you will be able to afford the repayments.
- That the income from which you will be repaying the mortgage is secure.
- That you will be putting a reasonable amount of equity into the business to match the borrowed funds.
How to Win French Business Finance
The key characteristics of a bankable French business finance proposition are:
- 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 attract trade buyers and investors in the public equity markets.
You may not have all of the above in place, but the more items on the list you can tick the better your chances will be of getting business finance.
A useful source of further information is the Invest In France website.
It is possible to arrange 100 % business finance?
100% is possible but truly exceptional as, post the dotcom bubble, most funding sources learnt that the risk of 100% financing was too high. If all you have is a business idea and a business plan, however good you believe it to be, then you will almost certainly be unable to raise 100% financing. However if you can tick off some of the items on the Key Business Characteristics list above and if a tangible value can be put on them then you might be surprised how much finance you would be able to raise.
Does the business need to have enough income to make finance interest payments?
Not necessarily. Most French business finance providers will be more interested in making a capital gain on their investment than on earning interest. If you have the right proposition you may not need to make any repayment of finance for up to 4 years.
What if I’m self-employed?
If you are self-employed you will need to move the business into a fundable structure such as a limited company.
Are euro interest rates expensive?
They have typically been around 2 % below comparable UK rates since the Euro was launched and tend to behave in a similar way to the old German Bundesbank rates. The actual interest rate you pay will be a standard Euribor rate plus a lending margin and will depend on the type of business finance you take. Because French business finance sources are generally more interested in capital gains than interest receipts the tough negotiation will not be about interest rates but about ownership structure.
Can I finance property and building work?
Yes, this is seldom a problem. If the business is well established there is sometimes the possibility of a French Business Mortgage on terms equivalent to a residential mortgage. However, if the essence of your business is a property, such as a hotel, then you will need to be able to prove that you will be able to meet all interest payments, operating expenses and capital repayments.
What about fees and other charges?