Know this: before even asking a bank to obtain a loan, you will have to constitute a concrete personal contribution. Getting involved financially is indeed considered a strong sign of motivation. Clearly, without personal contribution, no credit possible. “This sum must correspond to immediately available money. It will be used to finance everything the project leader needs before the first receipts of turnover”, explains Benoît Fougerais, co-founder and general manager of pretpro.fr, a network of independent experts in professional financing solutions specializing in franchising.
The level of expected personal contribution varies according to the nature of your project. 30% for a franchise creation; between 20 and 25% for a recovery. “In the latter case, there is already an asset, customers and turnover. This situation is likely to reassure financiers,” he adds. On the other hand, a banker will be able to require you to up to 50% of personal contribution if you launch out in the sector of the services. These activities are considered more risky by the lender who cannot pledge himself on the goodwill or reimburse himself on the tangible assets. If you intend to acquire the walls of your project, then count 10% additional contribution.
You’re going to have to break your piggy bank
To raise these tidy sums, you have no choice, you will have to break the bank, starting by drawing on your own savings, including your passbooks… If you were previously in office and if you received severance pay, severance agreement or even a transaction, reserve these amounts to inflate your personal contribution. Also consider the “heart money” system. “If members of your family or friends wish to give you or lend you funds, free of charge or not, this is also included in your contribution”, details our expert. To be reserved, however, for very close friends and because money and friendship rarely go hand in hand! Another stage of the rocket that should not be overlooked: crowdfunding. “This time, you are appealing to all French people. This money will allow you to cover immaterial expenses such as communication costs, working capital requirements… In short, everything that banks do not like”, he illustrates.
If your previous job allowed you to receive unemployment benefits, check if you are eligible for business recovery and creation assistance (ARCE) as this may be taken into account in the calculation. To qualify, however, you must meet three conditions: have created or taken over your business as a franchise after registering with Pôle Emploi; benefit from the return-to-work assistance allowance (ARE) and assistance to business creators and buyers (ACRE). Either a partial or total exemption from your social charges for one year. If you meet these three criteria, the amount of the ARCE is equivalent to 45% of a capital corresponding to your remaining ARE rights. You will then receive a first payment when your application is validated, and the second six months later – provided of course that you are still carrying out this activity.
Don’t forget “money from the heart”
In addition to your personal savings, a possible “money from the heart”, crowdfunding and ARCE, be aware that the loans of honor granted by France Active, Réseau Entreprendre and Initiative France are also taken into consideration in the calculation of your quota- go. Their amounts are not huge (from 5,000 to 15,000 euros), but they can serve as leverage with banks. “At the moment, banking establishments continue to finance quality files. Clearly: those in which at least 20% of the personal contribution comes from the candidate’s own funds. Impossible to convince a banker with a contribution consisting only of the ‘ARCE and loans of honor”, underlines Benoît Fougerais, managing director of pretpro.fr. You have been warned.
An article from the Franchise special issue of the Express. On sale since March 16.