December 10, 2022

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Financing: where to find the money to start a business without borrowing?

How to finance the first months of your business? Beyond the personal contribution of each of the founders, who to solicit?

Family, friends, support networks, sometimes banks, public authorities, your future clients… Here are some ways to start with little without opening up your capital.

● Love money: relatives in pockets

Family and friends are the very first sources of funding for project leaders. We call this: “love money”. It is mainly used at start-up, when the entrepreneur must quickly mobilize a little cash to get started.

This fundraising can take the form of a donation. Thus, each parent can give up to 100,000 euros per child every fifteen years without having to pay donation rights. This tax allowance falls to 31,865 euros in the case of a donation made by the grandparents and to 5,310 euros by the great-grandparents. If the donation exceeds these amounts, the tax administration applies a progressive tax scale on the excess.

This money contribution can also take the form of a loan between individuals. Repayment period, amount of monthly payments, interest rate: it is the two signatories who decide the loan conditions … In general more advantageous than a bank loan. The loan between individuals is all the more attractive as the payment of interest is optional. If the lender provides for interest, it must not, on the other hand, exceed the usury rate set by the Banque de France. Please note: the drafting of an act is recommended regardless of the amount of the loan, and it is compulsory from 1,500 euros. This document can take the form of a notarial deed or a private sub-signature. Beyond 5,000 euros, the loan must be declared to the tax authorities by the lender and the borrower.

● Honor loan: you are worth it

Concretely, the loan of honor is a zero rate credit, without guarantee or personal guarantee. It is granted on an individual basis, which allows several operational partners of a company to be able to claim it. Their amounts vary from 1,000 to 500,000 euros depending on the profile of the applicant (s), the maturity of the company and the project. It is granted to business creators and buyers, but also to managers with development projects. These loans are generally subject to a deferred repayment.

Several support networks distribute these honor loans: Initiative France, Réseau Entreprendre, the Association for the Right to Economic Initiative (Adie) or the Raise endowment fund. Obtaining them gives credibility to the business creation or development project, and creates a leverage effect. This is in particular the case for the solidarity loan of honor (ex-mother-of-pearl) of a maximum of 8,000 euros intended for the so-called fragile public which is obligatorily attached to a bank loan. The various networks estimate that for one euro of honor loan, additional funding varies from 8 to 13 euros.

● Crowdfunding: sentimental crowd

There are more and more projects financed by their future clients. Crowdfunding platforms, or crowdfunding, in the form of a donation (with or without counterpart) such as Ulule, KissKissBankBank, Miimosa, Tudigo, Zeste, etc. allow companies and project leaders to launch support and pre-order campaigns. This method of financing is particularly advantageous, because it makes it possible to collect a cash advance. In 2020, more than 100,000 donation collections were carried out with a success rate of 75% and average amounts per collection of 1,479 euros without compensation and 7,144 euros with compensation, according to Participatory Funding France.

● Public aid: it’s a gift!

Funded by the public investment bank, the French Tech Stock Exchange, subsidizes start-ups through an endowment of up to 30,000 euros, or even 90,000 euros for companies that develop breakthrough innovations with high technological content. The winners benefit from personalized support ranging from the construction of the business plan to the preparation of fundraising. Since its launch in 2014, the French Tech Grant has been awarded to 3,000 companies.

Local authorities, in particular regions, encourage business creation and innovation in their territory. Ile-de-France offers, for example, to companies with fewer than nine employees grants ranging from 55,000 to 150,000 euros to finance investment expenditure within the framework of the TP’Up Relance call for projects. The Paca region grants grants ranging from 100,000 euros to 500,000 euros to promote the establishment of new businesses with high employment and growth potential in its territory through its Southern Region Attractiveness system.

Essential ! The website published by the Hauts-de-France CCI lists all the funding available at national and local level.