loans

The professional bank loan

As part of your business creation project (but not only), you can apply for a professional bank loan. The purpose of this financing scheme is to enable you to make certain investments necessary for the start-up of your business or its development. Concretely, an establishment will lend you money to enable you to buy a good or to launch your activity. In return, you undertake to reimburse the sums loaned and to remunerate it for this

 

What is a professional bank loan?

As its name suggests, a professional loan is a credit exclusively reserved for legal entities (companies) or individuals exercising an independent professional activity (sole proprietorships).

The nature of the activity carried out has no impact on the financing system. It can be a commercial, craft, liberal or agricultural activity.

The size of the company is also irrelevant. All professional structures are concerned: from the VSE (very small company) to the large company.

What are the characteristics of a professional bank loan?

A loan is generally characterized by its nominal amount, interest rate, amortization period, and repayment terms. The schedule provided by the bank usually contains all this information.

 

Nominal amount This is the total amount you borrow from your bank. This amount depends on the nature of your project and its size. Your business plan will help you determine your exact financing needs

Interest rate This is the remuneration of the organization that makes the funds available to you. In return for lending the money and the estimated risk, the bank sets a rate that is used to calculate the interest it is entitled to. The higher the risk, the higher the interest rate.

Amortization period This is the number of months or years over which you will repay the borrowed money (less than 3 years, between 3 and 7 years, or more than 7 years). It depends on the characteristics of the asset financed: nature and duration of use.

Repayment terms These are specific provisions negotiated as part of the repayment of your loan. They include, for example, the possibility of a deferred repayment or the possibility of total or partial early repayment.

What are the financier’s obligations towards the financed company?

Your lending institution must provide you with certain information. They are included in your loan contract. These are the characteristics of the loan (interest rate, repayment period, annuity…) generally grouped in a schedule to which is added the information of the guarantors.

First of all, the interest rate of the loan contract must be fixed in writing. It must include all incidental fees required by the bank (application fees for example). The APR, or “total effective rate”, must therefore be set out in writing.

After signing your loan offer, you will certainly receive a schedule. This document will allow you to understand the speed at which you will repay your commitments. Each repayment schedule has two components: amortization of the capital and the related financial expenses. The first helps to pay off your debt, unlike the second, which only remunerates the bank for the money loaned

Finally, the bank must obligatorily inform the guarantors (individuals) of their commitments in force on December 31 of a year. In particular, the document must specify the amount of the outstanding debt (capital + interest + other incidental expenses).

What guarantees can the banks require?

Banks require guarantees when they grant professional loans (surety, lien, mortgage, collateral …). You will surely not escape this rule. The mortgage concerns real estate and the pledge of movable property (usually intangible such as financial securities). The lender’s lien allows your bank to recover the sums it has lent you in priority over your other creditors.

In order to obtain the best financing terms, keep several things in mind. First of all, try to avoid, as much as possible, joint and several guarantees. This could force you to personally repay the amounts borrowed by your business, even if there are several partners. Secondly, get in touch with organizations specializing in this field, some of which offer to take over part of the required guarantees.

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