What is a business loan?

A business loan or professional credit is a credit granted to legal entities, called companies, or to individuals who are self-employed. This loan is only available to professionals.

Very simply, a bank loan involves a borrower, often a company, and a lender, which is usually a banking institution.

In addition to an interest rate to be paid to the bank, the business loan also involves a guarantee, such as a mortgage or a joint and several guarantee.

Business loans are generally suitable for any type of activity, whether it is commercial, artisanal, liberal or even agricultural. Also, the size of the business does not matter, although a good start in business or cash flow is a factor for success.

The professional bank loan is characterized by :

A nominal amount: this corresponds to the total amount borrowed from the bank.
The interest rate: this is a rate calculated for the interest that accrues to the bank in return for the amount lent and the risk of the loan.
Its amortization period: this is the length of time during which you will have to repay the sum borrowed. It is calculated in months or years. It is fixed at 7 years maximum.
The terms of repayment: they correspond to the specific provisions that you will have negotiated in relation to the repayment of the loan.

Contrary to personal credit, the professional loan is thus aimed at a multitude of professions and different business sectors.

Who is eligible for a business loan?

The professional credits are for any person who has vocation to finance a creation of company or the development of company, or to fill the punctual deficit of treasury of a company.

However, it is necessary to have either the status of a sole proprietorship (EIRL or microenterprise) or also a company (SA, SARL, SAS, SCI, etc.).

Thus, a liberal profession such as an architect or a dental surgeon, as well as an association or a farmer can claim a professional loan.

Those who apply for a business loan are those who may wish to finance the following items:

Tools
Material
From the research
International development
Patents, trademarks or software
Shares or stocks
Franchise entry fees

The professional credit answers three main types of needs for a company or a professional which are, the equipment, the real estate or the treasury.

Overall, there is no typical profile to qualify for a business loan.

The banks will however be very attentive to the viability of the business project, its potential rate of return as well as an evaluation of the motivation of the project owner.

Your project leadership skills will be put to the test directly in the loan negotiation.

What is the rate for a business loan?

Interest rates for business loans are generally between 0.9% and 1.4%. They can be fixed or variable rates.

This obviously depends on the amount and duration of the loan, but also on the experience of the project leader, the company's activity and the nature of the investments.

In France, the average interest rate in November 2021 was 1.13%.

How is a business loan repaid?

The business loan in fine is repaid once all the funds have been paid out, at a fixed rate. This is more relevant to more experienced businesses.

Depending on the terms you negotiated when you took out your loan, payments may be made monthly or quarterly.

As with a home loan, withdrawals are automatic by debiting your account on set dates. Depending on the conditions set, it is possible to make an early repayment of the loan. This will have been described in the loan contract with the bank.

It is generally always possible to make an early repayment, but under specific conditions to be checked with the bank.

In other words, it is possible to prepay the loan if the credit does not finance the professional activity of the person, and this with amounts exceeding 10% of the loan.

For these loans there are three different types of repayment to be potentially negotiated at the beginning of the contract: the amortizing loan, the deferred repayment or the bullet loan.

What is the duration of a business loan?

The possible terms for a business loan are quite variable. The duration of the loan can be quite short (several months), or between 2 and 7 years. On average in France, the business loan is between 5 and 7 years.

Some business loans to finance business real estate may also extend to 15 years, as this is a longer term loan.

How do I get a business loan?

Before obtaining a business loan, it is necessary to check your financing strategy in order to adapt the credit to your projects and ambitions, as well as the expected achievements.

It is also necessary to make a choice which is the most adapted to your activity. For that, it is possible to be accompanied for example by a professional credit broker.

The procedure is as follows. You must first present the Kbis extract of your company, an identity card, a solid business plan of your company, your financial forecast to justify the loan, as well as other documents such as proof of address or bank statement.

Overall, to apply for a business loan, you must be rigorous about your file in order to make a good impression and maximize your chances. The viability of your project must be demonstrated in front of the banker, which allows you to justify your request and its amount.

To also put the chances on your side, it is also to ensure its presentation. The banks also check the charisma, the experience and the seriousness of the loan applicant.

What are the deadlines ...

To obtain a business loan?

The time frame to get your business loan is usually between 15 and 30 days. However, the administrative steps for applying for a loan can be quite variable.

Between the loan offer and the release of funds?

It all depends on how well you've taken care of the paperwork beforehand. Once the loan agreement is signed, it can take anywhere from a few days to two weeks to release the funds.

Who to contact for a business loan?

For a business loan, it is important to first compare the different banks and their offers. After having solidly constituted your file, you must start to approach several establishments at the same time.

This will allow you to find the best offer for your loan, in order to benefit from the best rate for business credit. For this, brokers are often good points of contact, because they have a large network of partners and can therefore better accompany you.

For a business loan, it is also important to note that insurance is required, just like for a real estate or personal loan.

Often, the banks where you are going to apply for a business loan also offer you to choose their internal insurance contract. Beware of their expensive prices and their lack of guidance on insurance.

Are there any interesting alternatives to a business loan?

Karmen is a non-dilutive funding solution that helps digital businesses access instant growth capital. Instead of waiting for online or subscription revenues to be collected month after month, Karmen unlocks the annual value of those revenues, up front. Karmen's solution allows digital businesses to access instant growth capital, within 48 hours, to fund their growth expenses (customer acquisition, marketing, recruiting, technology and more).

Revenue Based Financing is a new financing method that is gaining ground in France. This financing method is non dilutive (you remain the sole owner of your business) and very quick to obtain.

No need to build a financial file or negotiate an interest rate! Simply connect your billing, accounting and bank accounts to the algorithm in read-only mode and find out if you qualify in less than two days.

Once eligibility is determined, you will get a very clear loan offer, with no hidden fees, with monthly payments to be paid back. The funds can be released immediately, without any guarantee.

In addition to financing, Karmen offers you support over the long term with a loan that increases crescendo as your income increases.

If you want to know more, please contact us!

The business loan is simply a loan repayable after a certain period of time by a company to a bank according to conditions fixed in advance in a contract. It is designed to help business or project owners finance their projects.

They have the reputation and the advantage of being less restrictive than private loans. The professional loan can directly finance the premises, the equipment or serve as cash flow. The conditions are very advantageous, and the interest rates are generally very interesting.