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Financing business transfers

Home > French Business Law | Published 2015-11-12

The business transfer is one of the major challenges of upcoming years. In recent years, many managers have begun moving towards retirement, causing a reason to perform a business transfer, a trend especially prevalent in family businesses. Selling to funds or foreign groups is not, at least in this field, rare in the absence of another buyer or adequate finances for taking over the business. More than 15,600 businesses are managed in France by a manger that is more than 50 years old. Therefore, it is inevitable that for those companies the question of the transfer will be asked within the following years.

The importance of credit during a business transfer

The government regularly takes fiscal measures to encourage business transfers. Public assistance has also been put into place, similar to systems used by entrepreneurs.

At present, almost half of business transfers are financed by credit for an average amount of 300,000 euros. The establishment of such a support system actually depends on the market, and the existence of sufficiently established competition. In effect, these funds are generally put in place to finance the riskiest margins of the operation where banks do not seem willing to commit or to be expressing much interest.

Financial aid for the business transfer

The initiative for public support was triggered by a demand from the Oséo group, who recently merged to form the Public Investment Bank, and already offers bank credit for the creation of businesses in small banking sectors or risky segments. Oséo typically deals with two types of risky transfers: both guaranteeing banking credit on the recovery of commercial establishments for businesses with less than 5 people, and guaranteeing the transfer of about 10,000 PME’s, mostly of 10-250 people.

However, it is also possible to benefit from “mezzanine capital” accompanying a bank loan. This can be seen in the transmission development contract, namely a loan with collateral or personal guarantee of 40,000 to 400,000 euros. Oséo also proposes a system of loans for creating businesses (Prêt Création d’Entreprise or PCE), giving 2,000 to 7,000 euros, and allowing a postponed grace period for principal and interest payments of 6 months.

Otherwise, know that other funding methods are worth considering when transferring or taking over a business, such as private offerings, banking loans, or “honor” loans. As part of a business transfer, call upon the expertise of a business attorney who will allow you to choose a solution well adapted to your project, guaranteeing your eventual success.

This article is available online for public information purposes. It is updated regularly, as needed. Due to the constant evolution of the laws and the legal system, we cannot guarantee that the information in this article is still applicable. We invite you to contact us with any legal questions or concerns you have regarding this topic at +33 1 56 79 11 00. In no way can this firm be held liable for articles that contain inaccuracies or are now out of date.

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