What are the different types of business loans?
4 min read
Professional credit brings together different types of credit, each of which allows you to finance specific needs: creating or taking over a business, investing in real estate or developing your business. The financial levers for these different projects are numerous. Depending on its purpose, each type of business credit has its advantages and disadvantages. Here are some examples
Depreciable loan or classic professional loan
This is the most common form of business credit. Like credit for individuals, the professional loan consists of repaying the capital and interest at regular installments over a fixed period. It makes it possible to cover a variety of needs: creation or takeover of a business, acquisition of equipment, premises, or even meeting a need for cash (working capital requirement, acquisition of shares, capital increase, etc.).
This credit enters the accounts of the company, in the liabilities of the balance sheet for the amount borrowed which will decrease over the repayments and in financial charges in the income statement for the interest paid.
Crowdlending or crowdfunding
Translated as “crowd lending”, crowdlending is a quick and easy way to finance the growth of your business. These are individuals who invest in the company, generally against returns. This technique often makes it possible to finance needs that are more difficult to justify to a bank. In particular, with
Suitable for VSEs and SMEs, commonly used by start-ups, this type of financing takes place via an online participatory loan platform. Like Agrilend, Unilend, Lendix, Lendopolis or WeShareBonds.
It allows the company to obtain professional credit without seeking a bank loan. Without request for guarantee or contribution, the release of funds occurs quickly, a few days after collection.
The professional in-fine loan is subject to a fixed rate. It consists of paying the loan interest and the insurance at each due date on a regular basis. The repayment of the capital occurs only at the end of the loan period and is to be paid in one go. It is often granted to financially solid companies.
The capital is entirely due at the end of the contract. It presents especially for the companies, a tax advantage.
It is a type of loan reserved for hotel and restaurant professionals. The brewer’s loan consists in the supplier (generally of drinks, professional equipment, etc.) granting credit or material support to the professionals of the CHR.
It is usually accompanied by an exclusive contract between the restaurant and the supplier. This contract determines a minimum volume to be ordered per year and the commitment to supply only from him.
a total amount divided by 84 months (similar to a bank loan but without interest to pay)
a discount on the volumes purchased (and therefore no borrowing costs).
Reimbursement of this loan will be made via advances on discounts up to €20,000 per year, which will not generate any cash flow, and therefore no impact on the overall cash level.
Of course, if the contracted volumes are higher, the discounts will also be higher. Conversely, if the volumes are lower, the duration of the contract is extended.
This financing is not subject to VAT, so it does not enter into the products and therefore into the base for calculating the IS.This type of loan has a cash and tax advantage.
Authorized overdraft: The overdraft granted by the bank can run over several weeks or months. However, it will be necessary to justify an imminent entry of money to be able to benefit from this device.
Overdraft facility: The overdraft facility cannot exceed a period of 15 days. Unlike the bank overdraft, it is a temporary solution to authorize the debit of the bank account in the event of unexpected difficulty.
Campaign credit: This is a credit dedicated exclusively to companies with seasonal activity. It will be necessary to present a schedule of cash inflows and outflows to demonstrate the seasonality of the exercise. It will also be necessary to prove the stability of the company to the bank which will grant this type of credit.
As with equipment leasing, it requires the purchase, by the financial lessor, of the business building which will then be leased to the tenant business (the lessee), generally with an option to purchase in end of contract.
With this type of loan, the company can rent real estate but also furniture (machines, vehicles, etc.). The bank becomes the owner of the property in question and the company pays rents every month. At the end of the term determined by the loan, the company becomes the full owner of the property. This is a guarantee of security for the bank. Indeed, in the event of default of payment, it can easily recover the property, resell it and thus recover its due. The advantage for the company is that this loan avoids inflating the balance sheet with a loan. It also makes it possible to remain in the expenses of the balance sheet, therefore to reduce the result and thus to pay less taxes.
