Your market research is looking good, but your business plan shows a need for financing greater than the capital you have? You have come to the right place!
We have prepared this guide to help you understand the different alternatives available to you to finance your business creation project.
Equity investors
Equity investors will take shares in your business with the aim of making a profit in a few years.
This type of investment is obviously only possible if you create a company, and not a sole proprietorship or a sole proprietorship .
Calling on equity investors has 3 major advantages.
The 1st advantage is that you have no obligation to repay the funds. Your investors will hope to be able to achieve a strong return on investment by receiving dividends or realizing a capital gain on the resale of their securities, but if things do not go as planned you will have nothing to repay.
The 2nd advantage is the credibility it brings to your project. Capital contributions made by investors will strengthen the company’s equity, which will give you greater credibility with banks and your business partners.
Investing in equity nevertheless has 2 disadvantages. The 1st is that in return for this investment, you will have to cede part of the control of your company to the investors. The second is that equity is the form of capital that costs the company the most in the long term (need to offer an attractive return on investment to attract investors).
You can seek equity investment from different types of investors.
You can first approach your associates to offer them to advance money to the company on an associates current account in addition to their contribution to the starting capital of the company.
You can also turn to your loved ones to solicit an investment in love money .
Finally, you can approach professional investors: business angels or specialized funds depending on the sector and the level of progress of your project.
Banks and credit institutions
You can call on banks and specialized credit institutions to finance part of the company’s assets.
To put it simply, you need 3 things for your project to be bankable:
demonstrate that your project is credible: existence of a market, management team familiar with the sector, etc.
assets to be financed: banks only lend to small businesses based on historical assets or cash flows
an equity contribution allowing a fair distribution of financial risks between the bank and the project leaders
The main advantage of bank financing is that its cost is relatively low compared to equity. The main drawback is that you will have to adhere to interest payment and principal repayment schedules.
There are a large number of specialized products at your disposal here: from overdrafts to loans and leasing. We have grouped the presentation of the operation and cost of these products in the following 2 guides:
Crowdfunding platforms allow you to collect donations, loans, or investments from a large group of people.
The idea behind this concept is that it is sometimes easier to find 1,000 people who can contribute €1 to the financing of the project than one person who can contribute €1,000 alone.
You can find more information on how crowdfunding works and who participates in our crowdfunding guide .
Public bodies
The last type of actor from whom you can seek financial assistance to finance your business creation project are public bodies.
We find in this category the aid granted by the employment center, the financing offered by BPI France , and certain subsidies offered by the State and the European Commission.
Public funding has not yet been discussed too much on our blog. We will soon add articles on this subject, but in the meantime you can find more information on the Public Service website .
Well, we hope that this guide to financing a business creation project has been useful to you. Feel free to share it on social media and let us know your reactions in the comments.
