What bank guarantees for your professional project?

If the banks are willing to lend, they do not do it without guarantees! Their objective is to finance professional projects, while managing their risk of not being reimbursed. As a project leader, you need to discuss these guarantees. There are different possible options that you must understand in order to optimize the financing of your business project.

As for the purchase of real estate, the bank can offer you as a guarantee either to mortgage your property, or to call on an organization (internal or external) which will stand surety for you.

Here are the different solutions available to you and that banks can offer you: collateral, personal surety and counter-guarantee organizations.

Collateral

It is a written commitment by which a borrower gives an asset as security for the debt that he contracts. It is the counterpart of the mortgage in real estate.

In retail and franchising, pledging business assets is common practice. In the event of default by the company, the bank may resell the business at auction. Obviously, the pledge of a business is not worth much on a company that files for bankruptcy, except in the case of a location of very good quality. But if it relates to the intangible elements of the fund (customers, right to the lease, etc.), it can also apply to tools and equipment. In the event of the sale of the business, the bank loan will then be reimbursed in priority.

Pledging of shares is a guarantee used when buying the shares of a company (and not the fund). The bank will become the owner in the event of suspension of payment. In the event of resale, the bank will be reimbursed as a priority if the debt is still existing.

Savings collateral consists of placing a sum of money in an account such as life insurance or term account. In the event of default, the bank will recover the sum invested to reimburse itself.

The pledge on vehicles or equipment is another kind of guarantee, but little used because it is quite restrictive in terms of regulations. The bank will recover the property in the event of non-payment.

These guarantees also allow the bank to see their debt repaid in the event of the sale of the property.

The physical person deposit

The personal surety designates a natural person – the entrepreneur or a third party – who undertakes to reimburse the company’s debt on his personal assets or his income in the event of default of the company. This solution is risky because it can impact the life of the project leader and that of his family. Often expressed as a percentage of the amount borrowed, it is almost never degressive.

You must therefore limit the amount and duration of this type of deposit. For example, you can negotiate that this amount is reduced as and when the guaranteed loans are amortized. It is also better to ask that the bank renounce suing the heirs. And in general, it is better to avoid the spouse acting as surety, so that only your own property and your income can be seized.

Another important point is that for a deposit to be valid, the amount of the deposit must not be clearly disproportionate to the assets and income of the entrepreneur at the time the deposit is signed.

Surety or counter-guarantee organizations

The principle is that a bank or a specialized organization undertakes to pay a determined amount in place of the defaulting debtor. This organization acts as a surety for part of the credit. The project leader bears a cost which is calculated in proportion to the guaranteed amount.

There are several of which here are the three main ones:

• La Siagi: created in 1966 by the chambers of trades, Siagi’s expertise is widely recognized by banks and for franchise creations.
• BPI: public investment bank created in January 2013 (previously OSEO).
• France Active: created in 1988, it thus participates in the financial inclusion of the most fragile creators, in the financing of the most socially ambitious companies, in the development of an environment favorable to committed entrepreneurs and in the emergence of a more responsible finance.

Today it is difficult not to appeal to a counter-guarantee organization, because this has many advantages. This gives weight to the financing file and facilitates the agreement of the lender. Likewise, an agreement from a counter-guarantee organization can make it possible to avoid any personal guarantees requested in addition by the bank or to reduce them.

All these guarantees are cumulative. You can try to optimize the overall cost by implementing mixed solutions. Another interesting approach consists in resorting to financing other than bank financing because they make it possible to reduce the amount of guarantees by the same amount. To properly study the benefits and costs of each solution and build a structured and optimized financing plan, the advice ofan expert in professional financing solutions can enlighten you.

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