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All about professional credit
For many individuals, starting a business is a dream. Unfortunately, the accompaniments are missing and getting started can be scary. However, there are opportunities for loans to professionals to help them carry out their career project, to accompany them in major investments or to counter a blow. For future professionals and established professionals, professional credit is an undeniable asset.
Our experts tell you everything! Discover their tips and tricks to finally know everything about professional credit.
What is professional credit?
As its name indicates, professional credit is a form of loan granted by banks or specialized lending institutions to professionals and businesses only. Many professionals are concerned, including micro-entrepreneurs, craftsmen, traders, liberal professionals, farmers, and associations. If all businesses are involved, regardless of size, Very Small Enterprises (SOEs), Small and Medium Enterprises (SMEs) and Small and Medium Industries (SMIs) are the largest beneficiaries.
This type of credit is intended for the financing of equipment and materials, the constitution of a treasury fund or the consolidation of capital to help a company to start or grow by investing. In addition, professional credit can make it possible to buy professional premises or to build them, or to buy offices for the purpose of real estate investments.
The different types of professional credits
In the professional sector, the world of credit is as vast as in the private sector. The pros are a very interesting clientele for banks and lending institutions. Thus, they have developed a wide range of loans for professionals from all walks of life, each formula being distinguished by the need it covers and the duration of the subscription.
Professional credits: a distinction by necessity
Each professional has unique needs to start his business. Some will have to invest in expensive equipment, others in specific equipment, and others in adapted premises. To meet these needs and to match the profile of professional borrowers, several distinctions are made among the professional credit formulas.
- Depreciable credit: this loan is the most subscribed traditional formula. It consists of the loan of a sum of money which is then reimbursed by the professional according to a fixed schedule defined at the signing of the contract.
- The revolving loan: this form of pro credit works like consumer credit revolving or revolving for individuals. The professional has indeed a sum of money that he is free to spend at his pleasure, without justification. It is then thanks to its regular refunds that the professional renews the sum.
- Leasing: leasing, also known as leasing, allows the borrower professional to benefit from a property against the payment of rent, for a fixed term.
- Factoring: Thanks to factoring, the professional can subcontract his client account to a factoring or factor company. Thus, it has a large flexibility and an interesting cash gain.
- Credit redemption: This form of pro credit works like the repurchase of credit for individuals. The bank or lending institution buys all of the current credits of the business or professional, and collects them into one. The pro pays only one monthly payment and is given a single timeframe with a single interest rate. The repurchase of credit is very interesting, especially during the first years of a business, to facilitate the management of accounting.
- The cash facility: this particular form of pro credit consists in authorizing the professional borrower an overdraft over a defined period when the contract is signed. Short of duration (on average 15 days), this allows any pro not to be in difficulty in case of cash flow problem or late payment of its customers.
- The overdraft authorized: as in the case of the cash facility, the professional borrower is allowed an overdraft, but for a period exceeding 15 days.
Professional credits: a distinction on the subscription period
There are two types of pro credit: short-term loan and long-term loan.
- The short-term loan: this type of loan allows a pro borrower to quickly and easily dispose of a sum of money. Most of the time, the short-term loan is used to build seed capital or to provide working capital. He repays quickly, hence his name.
- The long-term loan: this type of loan allows professionals to finance the purchase of equipment, equipment or premises necessary for the exercise of their activity. It is repaid in the longer term, thanks to the revenues generated by the company.
Professional credit: how does it work? How to subscribe? Who to turn to?
To take out a business credit, you can turn to a bank – yours or a competing company – or a specialized credit agency.
Before you start, it is important to define your project. Indeed, your application must be supported by a solid file, as for most specific credits. So be ready to defend yourself and to present your professional project. The lender will ask you where your career plans are and where your goals are. Beforehand, make sure you have the necessary to get you started (diplomas, certifications, agreements, etc.) and present a successful project that considers the investments needed to launch your business, the possible capital you need to start, even a forecast of revenues and expenses for the first months, even years. This preparation work may seem tedious. However, it is strongly recommended to inspire confidence in your bank, and it will be very useful for you to better visualize the near future and distant future of your company.
Once your loan file and the necessary documents are collected, you can go to the bank or the lending institution. The latter will be particularly attentive to certain criteria, because any lender tends to be cautious since the crisis of 2008. To be accepted, your file must be solid.
- In the case of a new business, the bank or credit institution will review your creditworthiness as a professional borrower and as an individual. If you seem reliable and manage your accounts properly, without regular overdrafts, if you do not have other loans in progress and if you seem trustworthy, you will have a better chance of seeing your file accepted. In addition, if your business plan and your business forecasts are well built, you will inspire confidence!
- In the case of an existing business, the bank or credit institution will review the balance sheet of your business. Indeed, the lender wants to be sure that it is solvent, that you know how to manage your accounts and that you do not already have several credits in progress, or even debts. In addition, for the same purpose, it will examine the company’s operating accounts.
Be aware that if you have a personal contribution of at least 20% of the amount requested, a bank or credit organization will be much more open to your business loan application. This personal contribution illustrates your ability to manage your financial resources and your good economic management.
Last thing, apply for a loan at the size of your business. Do not invest in expensive materials from the beginning that will only be useful in the future or in large premises in anticipation of good growth in the years to come. The bank is unlikely to risk it! See the extent of your progress. Start at the beginning and let your business grow to its true size.
Finally, do not hesitate to compare the offers of providers in professional credit. Getting a loan is not always easy, but do not sign anything! Any bank or credit institution is free to charge the rates and rates of its choice; Do not get fooled ! Make quotes online, compare offers and choose the financial provider that suits you, who will listen to you and who will accompany you in your professional project. In addition, if you wish or if you lack time, seek the services of a professional credit broker; he will meet the banks for you, he will peel the offers and he will present you the best proposal (s) at a lower cost.
It’s up to you!