New small business start-ups in France can qualify for a cheap, unsecured business loan.
Prêt à la création d'entreprise
The main loan that is available is called the prêt à la création d'entreprise (PCE).
It is a loan backed by the government, but administered by the banks.
Eligible businesses are those under 3 years old who have not previously benefited from medium or long term bank finance within the last two years.
Most business sectors quality, except agricultural activities, the finance sector and those engaged in the sale or rental of property.
The owner of the business must also not be the owner of another separate business.
The amount of the loan is between €2,000 and €7,000, with a repayment period of up to 5 years, and a capital and interest holiday of six months.
Although the loan is available on a completely unsecured basis, it is a central condition of the loan that it be accompanied by a bank loan of at least twice the amount of the PCE loan.
Clearly, such a condition provides some measure of reassurance that the loan is granted to a viable business.
If granted, it is also possible for 70% of the bank loan to obtain a government backed guarantee.
The rate of interest on the loan is the same as the rate granted on the bank loan, but currently ranges from around 3% to 5%, depending on the bank and the quality of the case presented.
It may well be a condition of the bank loan that you are asked to put up some of your own finance as part of the funding package, although this is not always a condition of the loan.
If this is the case, or you need more funding than can be obtained from a PCE, it is also possible to obtain a mezzanine loan to fill the funding gap.
This loan is called a prêt d'honneur, so called because once again it is granted on a completely unsecured basis.
The loans are offered by one of several business development agencies in France, such as Initiative France, Réseau Entreprendre, ADIE and France Active.
The maximum amount of the loans does vary between the agencies, but can be up to several tens of thousands of euros in the best cases.
Moreover, in general, the rate of interest on the loans is zero!
Needless to say, such loans are not granted on a casual basis, so expect to have to submit a strong business case in order to obtain one.
If you wish to make application for a PCE loan, then you should visit the local branch of your French bank.
Alternatively, make contact with one of the business start-up agencies or the local Chambre de Commerce/Métiers with a view to obtaining assistance in the preparation of your application.