Every entrepreneur needs to have the necessary funds to launch a project, but also to keep the business running smoothly until it makes a profit, or in the event of a temporary downturn.
The digital revolution and the extension of means of communication have led to a great diversification of financing methods: so as not to put all your eggs in one basket (especially in business!) we're going to take a look at the different financing methods available to launch your project in the best possible financial conditions.
Crowdfunding, also known as "participatory financing", is a financing method that involves a large number of people raising funds via a platform. The project is financed thanks to the addition of a multitude of donations from individuals or institutions.
Sometimes it's a call for donations, where investors can be remunerated via rewards. Some platforms set up loans between individuals seeking financing and investors at reduced rates.
Finally,equity-based financing is where the investor becomes a shareholder in your company.
Business angels not only enable you to raise funds, but also to receive real operational support in implementing your project. The skills, advice and contacts you receive are invaluable assets for making the right choices and enhancing your company's growth potential.
Being in contact with a business angel is also an asset for accessing other sources of financing.
Love money refers to the capital provided by friends, family or loved ones to help a project owner. As an alternative to bank loans, relatives receive shares in the company in return for their financial effort. It's also important to note that friends and family can benefit from significanttax advantages .
Finally, venture capitalists are investors in venture capital funds, designed to finance research and development activities and the launch of a new company. They are accessible via dedicated funds on the markets.
In theory, the entrepreneur is the first investor in his or her own structure. You can opt for equity financing, i.e. directly from your savings, or by depositing assets as collateral.
Paid-up capital refers to the payment in cash of all the shares subscribed to in a company at the time of its creation. Initially, shares may be subscribed in cash or in kind.
Once the capital has been set up in a secure account with a bank, it is released once the Kbis extract has been obtained.
The company can then use these funds for its operations
Contributing to a partner's current account involves bringing money into a company, which does not form part of the share capital.
Bank loans are a popular solution for business owners. The company receives a sum of money which it repays in several instalments, plus additional interest.
Bank loans enable new financing to be obtained without the partners or shareholders seeing their share of capital reduced, or needing to invest more.
However, it is not uncommon for a company to be forced to repay its loan before it has even had a chance to make a profit.
Obtaining a loan sometimes requires heavy guarantees that are difficult to obtain.
Some French companies are eligible to receive government funding.
Financing is provided by the Banque Publique d'Investissement (BPI France). Additional financial assistance can be obtained from Chambers of Commerce, Pôle Emploi, or entrepreneurial networks such as Initiative France or BGE.
Companies can also benefit from social and tax assistance. These vary according to the company's sector of activity.
For example, new companies setting up an industrial, commercial, craft or liberal activity in a regional aid zone(AFR) are exempt from income tax.
Zones de revitalisation rurale(ZRR), zones franches urbaines(ZFU) and bassins d'emplois à redynamiser(BER) also offer a 5-year incometax exemption .
Business start-ups can apply for ACRE, a social measure enabling them to reduce their social security contributions.
Faced with the vast number and complexity of existing systems, it's not always easy to find the right people to talk to.
What's more, the cumbersome administrative formalities sometimes discourage many entrepreneurs. To ensure the best possible financing for your business, you need to make your own choices, based primarily on your company's needs and profile.
Written by our expert Paul LASBARRERES-CANDAU
February 16, 2018
