Available to the self-employed, a medium or long-term investment loan applies in the following cases:
- creation of a business;
- acquisition or merger of companies;
- going from being a lessee to owner of a property;
- acquisition of land and/or buildings;
- development and modernisation of the business and making the business profitable;
- refinancing movable or immovable assets with bank debt to free up capital for other investments.
Documentation or description of the business
- copy of the company’s articles of association;
- group structure if the company is part of a more complex group;
- last 3 audited balance sheets of the borrower and, if applicable, the latest available trial balance;
- order book (where applicable);
- list of customers and their relative contribution to turnover;
- list of suppliers.
- forecast balance sheet or business plan in the case of a new business activity or a major expansion plan.
Presentation of the project
- detailed description (including figures) of the planned investment and, where applicable, a market study;
- financing plan;
- calculation of feasibility and return and calculation of the breakeven point;
- land: preliminary sale agreement, cadastral map, building permit;
- building: preliminary sale agreement, construction plan, building permit, specifications, quotes, photos (if any), lease, etc.;
- machinery: list of investments, replacement of existing equipment, additional equipment, purchase orders or invoices;
- company: preliminary sale agreement, due diligence, audited accounts, etc.;
The guarantee required by all banks before granting a loan is the solvency of the borrower and the profitability of the project to be financed. In addition, the bank will inform the beneficiary of the medium or long-term loan of the tangible, personal or moral guarantees deemed necessary to guarantee the loan granted.
The most common guarantees requested for an investment loan are:
- mortgage registration;
- mortgage mandate;
- pledge on business assets;
- assignment of rental income;
- assignment of a fire insurance policy (for a building);
- surety of the parent company or partners/shareholders;
- various moral guarantees.
When the partners/shareholders of a business have to stand surety for the company, the bank should be provided with the details of their financial situation.
Duration and amount
- medium to long-term;
- between 3 and 15 years (depending on the amortisation period of the asset to be financed).
As a general rule, financing of 70 % to 80 % of the value to be financed.
- interest rate depending on the quality of the client, the project and the guarantees offered;
- fixed or variable rate;
Repayment depends on different criteria, including, for example, the amount, the rate, the amortisation period of the asset to be financed, etc.
- constant annuity (repayment of the same amount each time, where the proportion of principal and interest varies), or;
- constant amortisation (repayment of the same portion of the principal each time and varying amounts of interest);
- monthly, quarterly, semi-annual or annual repayment.
The reviewing and processing times depend on the complexity, size and urgency of the case.
Advantages, disadvantages and risks
- financing of significant medium and long-term investments which could not be carried out with capital alone;
- large choice in terms of the different parameters of the loan;
- possibility of repayment holidays so as to reduce the repayment amount, e.g. interest only payments for the first 2 years;
- progressive use depending on the payment terms and conditions and interest only calculated on the portion actually used.
- debit interest is tax deductible, allowing the taxable amount to be reduced and therefore less tax to be paid.
- fixed rate: early repayment penalty to be paid;
- variable rate: no protection against the risk of interest rate increases;
- guarantees may need to be provided to the bank;
Risk of the company becoming over-indebted if the profitability analysis was not carried out meticulously.
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