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Financing a Business in France


Financing a Business in France

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Financing a Business in France

Unless you find yourself in the enviable position of having enough capital to personally invest in your expansion, finding other forms of finance in France may prove difficult. But only at first. Your initial step is recognising the avenues you can take to acquire backing and funding.

Government agencies are often set-up for the very purpose of spawning and nurturing new business. Likewise, expanders can also seize the opportunity to request governmental backing. Governments, worldwide, will always consider the impact and benefit that an established and successful brand will have on their local and national economies. Therefore, official agencies and bodies are generally willing to provide the necessary backing for any company which they see as commercially and economically viable.

Government backing, etc, will also be awarded to companies whose services they see as indispensable, or which the country is crying for. Accordingly then, perks will often be thrown at companies in specific sectors, or as an incentive to establish in a certain region.

Investors and business angels are another method of finding outside backing. These people arent hard to locate; they are always on the scout for a sound investment opportunity, and can be found wherever there is money to be made.

What's at stake, however, is another matter. How much equity in your business would you, if necessary, be willing to relinquish?

Comprehensive planning is essential for the success of any business in France. Raising adequate external funds can occasionally prove problematic. Smaller businesses could find securing appropriate and affordable funding both confusing and time consuming. Although sources of finance may seem scarce and unachievable, obtaining adequate funding for an initial investment should not prove difficult with the help of professional advice and guidance. It all really depends on the size of your business and the amount of funding needed.

Some of the options include:

Business Angels: Wealthy individuals, known as Business Angels, may provide the best source of finance. For a low level of equity, they will help fund you. The level of involvement they seek in the day-to-day running will vary, although some will not want any at all.

Private Equity: For higher levels of investment in France, venture capitalists provide a common source of equity funding. Currently, the amount of finance potentially available is significant, but success in securing such funding may not be so easy.

Overdraft: Borrowing from a bank remains the easiest method of external funding. But remember, an overdraft can be called in at short notice, so its use should generally be restricted to short-term cash flow funding, with longer term needs met by more secure loans. French Banks are generally quite reluctant to put in place an overdraft facility, especially if you are not able to provide a business plan for the three coming years, or at least financial statements for the two past years issued by a French Chartered Accountant. As well, you need to be able to show your involvement in the equity of your own company , and need to be able to provide details about your assets, that the bank may consider as a security towards the risk it may takes.

Fixed-term loans: These may provide a better solution to fund start-up costs, since repayment schedules and interest rates can be agreed and budgeted for from the outset. Such loans are usually by personal guarantee or by a fixed charge. For smaller companies, the lender may also require personal guarantees from the directors or controlling shareholders. Fixed or variable interest rates may be available with more complex arrangements available for larger loans. These restrict the interest chargeable.

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