You are an entrepreneur with a need for financing and you want to discover alternatives to financing by banks? This is good, start his business without going through the bank, it is possible!
A traditional actor in corporate finance for decades, banks have not been around so much in recent years … The complexity of obtaining a loan, lack of transparency and lack of meaning are the causes.
Thus, while the bank loan is the cheapest financing currently, which could be a boon for a company in need of financing turns out in fact much more complex.
The difficulty of obtaining a loan
The conditions for obtaining a loan are strict. Indeed, when entrepreneurs do not enter the boxes (especially when they start an activity, they do not have a CDI and stable income), banks do not have sufficient guarantees to lend. This can be as complicated when the need for funding is for an intangible activity.
To this must be added the possible slow validation of the file. If the procedure goes well, the contractor can count 1 month of delay. On the other hand, if the entrepreneur has to go to several banks before obtaining an agreement, it can take a lot more time and significantly delay the implementation of a project.
In addition, banks generally require entrepreneurs to provide about 30% of the needs of the company (source: CCI Paris ) (creation costs, legal expenses, expenses related to the rent of premises, expenses related to advertising, investments materials in equipment, as well as the need for working capital to get started). Without personal input, it is very difficult to obtain a loan.
A depreciated image of banks
Finally, the image of the banks was devalued after the financial crisis of 2008. The banks could then be cautious about granting loans. Indeed, ” banks tightened access to credit after the crisis because, worried about their balance sheet, they wanted to limit their exposure to risk as much as possible. (2) Financing by banks may also not match the values of some people … These doubts may be based on the link between the 2008 crisis and the banking sector that caused it, or the lack of customization of the support of bankers with entrepreneurs.
alternatives to the bank to finance his business
Combining the loan of honor and the financing in royalties to considerably strengthen the capital of the company
To get started, an investment of greatness can be the right solution. Indeed, these loans are granted to entrepreneurs directly, so they increase the company’s equity.
At the same time, you can mobilize your ” love money ” network and, instead of returning them to the capital, it is possible to offer them to invest in exchange for royalties. This method of financing consists of providing your investors, in return for financing, a percentage of your future turnover for a fixed period. A bit like a loan, but without personal guarantees to provide and more flexible! The method of royalties financing is of course framed by a clear contract that binds you to investors. Thus, you do not dilute your capital, you increase your own funds and you interest them directly to the growth of the turnover.
If you want to make your products known, you can also go to donation crowdfunding platforms with counterparties or pre-sales. This has the advantage of testing and financing your products with your future customers.
Capital investment, possible but risky
You can finally open your capital, but it is not without risks. In general, opening up capital is the last step in seeking financing for your business, this can be used to seek larger investments. For example, Alexandre Chartier, a famous startupper who launched – among others – Ornikar, explains that often when one opens up his capital, the company becomes a financial investment instrument , the real purpose of which is to be resold . He explains that this does not make it possible to have sustainable business development, with values specific to the founders … Capital investment can therefore be a solution, but it must be carefully considered.
In this article you will find financing solutions that fit each project .
The final word
Despite the complexities of access to credit and the lack of transparency around banks, it must be remembered that they are useful.
The bank is first necessary for the daily management of a company. And that starts when it’s created, since you have to deposit your capital into a bank account. Here again, the bank can slow down the process, but there are more reactive Neobanques like Qonto, of which we are very fans at musclecarfacts!
Finally, at some point in the life of an entrepreneur, the bank will be a relevant interlocutor. Indeed, after having used crowdfunding, possibly loans of honor and grants, the company will have a consolidated financing plan, which will increase its credibility and therefore the confidence of bankers. This will make it easier for the company to use a bank loan for urgent cash requirements or for the development of a new, larger project.