Banking credit
Borrowing from a bank is the most traditional source of external finance. The bank has the advantage of offering a wide range of credit options at reasonable interest rates.
What are the criteria for obtaining a bank loan?
The attribution of a bank loan depends on several factors. Firstly, in order to assess the risk of non-repayment, the bank uses qualitative factors such as the profile of the managers and management and the quality of the management of the business (e.g. well-organised production, correct accounting, regularity of controls, etc.). Quantitative factors include the liquidity, solvency and profitability of the borrower.
The bank wants to be able to assess your company's future repayment capacity, both on the basis of your existing activities and those of your new activities to be developed. Factors such as the level of indebtedness, potential declarations of bankruptcy or past repayment arrears will be examined.
Lastly, the bank's priority is to finance tangible investment needs (equipment) and needs linked to the operating cycle (working capital requirements) affecting either payment times or stocks. Risky investments (new concepts) and risky sectors (hospitality, retail, transport, construction/works, etc.) will also be more difficult to finance with a bank.
What security guarantees does the bank request?
The bank generally requires guarantees in order to reduce the risk it runs, and therefore its losses, should you no longer be able to repay the loan. The most common securities and guarantees are mortgages on real estate or pledges on assets such as stocks and/or debts.
However, the creation of a security interest is not in itself sufficient to be granted credit. It is above all the personal contribution and the repayment capacity that will tip the balance.
