It appears that the required investment is greater than your available capital. What financing options can you use?
As part of a business creation project, you have already carried out a market study and carried out a business plan. But something came out of control.
This article provides you with all the information you may need to find the right finance solution for you.
To obtain the necessary financing for the creation of your company, you can contact 4 main types of actors: public organizations, crowdfunding platforms, credit institutions and banks as well as equity investors.
In order to support business creators, public organizations offer financial support or facilitate project promoters’ procedures for granting credit. You can claim a number of aids, depending on your profile, the nature of your project and the location where you plan to locate your business.
The Brussels Guarantee Fund : this organization aims to help business creators who wish to obtain a professional credit in the Brussels-Capital Region. His intervention consists in providing lending institutions with a substantial share of the guarantees required by entrepreneurs who wish to subscribe to a loan. The ceiling is set at 80% of the overall amount of the credit and the cost of this assistance is limited to the payment of a single lump sum contribution.
SRIB (Regional Investment Company of Brussels) : it makes available to entrepreneurs various products dedicated to the financing of their future activities.
The AIRBAG scholarship : up to a maximum of € 12,500, divided into four tranches over two years, it is granted to anyone domiciled in Wallonia and planning to set up a business in this region as its main activity.
The Pre-Activity Scholarship : designed for any innovative entrepreneur. It can be up to € 12,500 to cover 80% of eligible expenses.
The e-business aids : they concern 2 parts. The premium for the creation of an e-commerce site, ranging from € 2,500 to € 15,000, proposed by Wallonia. RENTIC premium, capped at € 5,000, suggested by the same region for a business creator to use the services of a RENTIC approved consultant. This premium provides for the reimbursement of up to 80% of the intervention cost.
Assistance from AWEX (Walloon Agency for Export and Foreign Investment): for the financing of communication media for entrepreneurs who are planning to prospect export markets. The aid can cover up to 50% of media costs (excluding VAT). It may concern the printing of flyers, flyers, business cards, the creation of the company’s website, referencing, etc.
Crowdfunding allows you to obtain loans, investments or donations by speaking to a large group of people. This concept is based on the following idea: a project leader can sometimes find more easily a thousand people who can contribute 1 € to the financing of his company than to meet an investor who can bring alone an envelope of 1.000 €.
Thanks to the emergence of crowdfunding platforms on the Internet, crowdfunding is provoking a growing enthusiasm among start-up creators, as it presents itself as an alternative to traditional financing systems.
Crowdfunding works in an unusual way. It offers several options to project promoters in need of financing. Depending on the nature of their project and their expectations, they have the choice between a call for donations, looking for new shareholders or asking for a loan.
This solution is not just a way to finance a business. It can also be used to inform the public about the project. Many startups have found their first customers on these platforms before they even started their activities.
Credit institutions and banks
These organizations can respond favorably to your request for partial financing of your company’s assets. You must meet the following 3 conditions:
- Demonstrate the credibility of your project: the experience of the management team in the targeted business sector, the existence of a market, etc.
- Holding assets to finance: Banks rely solely on historical cash flows and assets when granting loans to small businesses.
- Equity contribution: to ensure that financial risks are equitably shared between project promoters and the lending institution.
The relatively low cost compared to equity investments is the main benefit of this financing solution. However, its major disadvantage lies in the rigor of repayment terms of the loan plus interest.
Investors take shares in the newly created company in order to enjoy a profit in the medium term. This solution can not be applied for a one-person business. The entrepreneur must choose the status of company.
By using equity investors, the project owner can benefit from 3 main advantages:
– He is not obliged to repay the funds. Investors place their money in the hope of achieving a significant return on their investment after a few years. They expect interesting dividends or a capital gain on the sale of their shares. In case the business does not work as planned, the project leader will have nothing to repay.
- The credibility of the project vis-à-vis commercial partners and banks thanks to investors’ capital contributions.
- Expertise and address book that investors could provide in equity, in addition to their contribution to the capital.
- This solution, however, has some disadvantages:
- In exchange for the capital contributed, the investors partially hold the control of the company.
- In the long term, this financing system is expensive for the company, as it will be obliged to ensure an attractive return on investment to attract investment candidates.
You now have all the necessary information on the financing options for your business creation project. It is up to you to study the “for” and the “against” in order to opt for the mode or modes of investment corresponding to your needs.