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Business in France

Cheap Credit in France

Tuesday 03 February 2009

There are a number of cheap sources of credit in France for a small business unable to get access to normal bank lending.

Expats in France seeking to establish a new business sometimes find difficult to obtain bank credit, particularly if they are newly resident, and without a track record with a French bank.

Despite the difficulties, all French banks are under pressure from the French government to ensure a proper level of funding for small business development, for which purpose they have created a special type of loan, called Prêt à la Création d'Entreprise (PCE).

These are normal bank loans up to €7,000, which can be obtained without the need to offer security against the loan.

The loan is available for a new business less than three years old, and only on condition you have not already received start-up finance. The rate and duration of the loan is determined by negotiation with the bank, but is normally on a favourable fixed interest basis for up to 5 years. You are entitled to deferred repayment in the first six months/year of the loan, and no arrangement fees are payable.

Outside of the main banking system, perhaps the largest source of micro-credit is available through a business development agency called 'ADIE'(Association pour le développement de l'initiative économique).

ADIE lends to start-ups that cannot get access to the banking system. They offer loans of up to €5000, repayable over two years. Whilst the rate of interest will not be far below what you might pay a bank, their whole raison d'être is to provide credit to those who have been refused a bank loan.

In order to obtain access to a loan from ADIE you will be expected to produce a clear business plan, and you will be assessed by a local business consultant.

Perhaps the most difficult obstacle is that ADIE requires that you are able to provide a guarantor for up to 50% of the loan as security against non-repayment. If you have no one who can assist, then you may be able to obtain a guarantee through the Fonds de cohésion sociale, a government scheme of financial support to start-ups. If you cannot obtain their support, of course it then effectively means you have to put up the security yourself, limiting the maximum loan to €2500.

Nevertheless, the loans from ADIE can also be accompanied by certain other types of business start-up loans, where this level of security is not required.

In particular, there are a range of other loans available through public-private sector partnerships, which could take the total loan to around €10,000.

These complementary loans are called Prêt d'honneur or Prêts solidaires. The loans are either interest free, or at a minimum level of interest. They are funded by the local and regional councils, so there is a geographic dimension to your eligibility for these loans.

With the complexity that surrounds all of these loans, your best approach would be to discuss your application with ADIE, who might then be able to assist in putting together a cocktail of financial support for your project.

If you are not getting the answers you need from ADIE, then you might also want to consider another major business development network called France Initiative. Indeed, you may well find that ADIE and France Initiative work together on your project in order to assemble the necessary finance.

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