A company has two kinds of needs. Short-term needs on the one hand and long-term needs on the other. This file tackles this last type of need. It essentially includes the company’s investments, that is to say the purchases or rentals of fixed assets. These goods allow (or will allow, in the event of creation) the company to exercise its activity. And like any outflow of resources, they must be financed .
Here’s how to fund the long-term needs of a business that’s just starting or running .
Defining long-term professional needs
By “ long-term professional needs”, we generally mean “investments”. This term essentially covers purchases of durable goods . These are fixed assets, or, in other words, assets that will help keep your business running for more than a year.
Intangible assets : software, trademark registration, goodwill, leasehold rights, etc.
And/or material goods : tools, industrial equipment, means of transport (car, motorcycle, scooter, etc.), fittings, furniture, machinery, computer equipment, land, construction , etc.
Equity financing of a company’s long-term needs
The primary means of financing your company’s long-term needs comes from internal sources . The funds come, concretely, from your pocket or that of your investors.
The source principle is social capital . It corresponds to the funds that you have injected into your company. These sums remain, in principle, blocked. They will only be reimbursed to the partners in the event of a reduction in capital or during the closing of the company, if the creditors have been able to be satisfied. You can finance your long-term investments in two ways:
Or by transferring the ownership of a property that you own personally for the benefit of your company (contribution in kind).
Please note, however, that contributions in kind may be subject to specific regulations. A commissioner of contributions must, in certain cases, verify the value that you assign to the assets.
Finally, the second mode of internal financing is, in reality, qualified as “quasi-equity”. This is the blocked partner’s current account contribution . The sums paid into the open account are blocked for the period provided for in the current account agreement . This duration is more or less long according to the cash needs of the company and the requirements of the banker .
External financing of a company’s long-term needs
Banks generally offer to finance the long-term needs of businesses . These are generally deposit banks or investment banks. The former draw on their customers’ deposits to offer financing while the latter use their own funds (they generally finance start-ups). That said, commercial banks offer two types of financing: long-term borrowing or rental/lease .
Long-term bank loan
A bank can grant a professional bank loan repayable over a long period . In general, the repayment term exceeds 5 years. A “professional” loan has the same characteristics as a “personal” loan. It is characterized by a nominal amount, a repayment period, an interest rate, a monthly payment and bank guarantees .
However, if you are applying for a bank loan, you should bear in mind at least two rules. First of all, the financial institution will only agree to finance you if you make a personal contribution of at least 25% . Then, the business plan that you are going to present must be irreproachable and show sufficient profitability. Your sufficient self-financing capacity must allow you to repay your loan in 5 years .
Financial leasing or leasing
You can also use a good without owning it (or, at least, at first). Financial leasing and leasing allow you to avoid having to immediately disburse all the funds necessary to finance your long-term investments. Their principle is very simple: the bank or the organization buys the property and makes it available to your company in exchange for the payment of rents or royalties.
At the end of the period of use, the contract may authorize you to purchase the good . We talk about “exercising a call option”. The purchase price takes into account the rents or royalties already paid. Your company then becomes the owner. This solution, which is more flexible (because it allows you to renew your investments), however, costs more than the traditional loan.