"The bond loan has the great advantage of allowing a final repayment of the amount of the financing, which preserves the company's cash flow"
SMEs make up the French economic fabric (9 out of 10 companies). They represent the world of ideas and talent and need a breath of fresh air to sustain their existence. But very often when they turn to traditional players, they do not have a suitable solution below 30 million euros. This is a heavy penalty for our French nuggets, even though they are the future of our economy.
The bond issue, a real solution for the development of SMEs
Bank financing is constrained by regulations, investment funds take a share of the capital, and between these two modes of financing, bond financing, non-dilutive and repayable at the end of the period, can be the ideal tool to enable the company to achieve growth. It is a medium/long-term financing solution with rates varying, depending on the typology, between 5 and 12%. The cost of this type of financing is therefore, certainly, higher than bank financing, but it has the great advantage of allowing a repayment in fine of the amount of financing (only the interests being repaid before the maturity date), which preserves the cash flow of the company.
Moreover, it constitutes a response to cover all needs, including those not financed by banking players, such as intangible investments, research and development projects, purely capital-intensive operations (exit of shareholders, OBO, MBO), asset financing, organic growth or, on the contrary, external growth.
Last but not least, it offers the SME manager a real alternative to equity, much less expensive and non-dilutive.
A secure investment platform dedicated to investors
SME managers traditionally turn to their banker when they need financing. If the bank refuses, they then turn to their accountants, who, having a "low-balance sheet" approach, are unfamiliar with this type of "high-balance sheet" financing.
It is therefore essential to sensitize business leaders and their financial managers to this solution, too often reserved for large groups, which is a real alternative to bring a new impetus and ensure a real future for companies with projects.
In addition to the lack of knowledge of this solution, there is also that of the private debt ecosystem: how to find financing in the unlisted sector, without an organized market, without knowing who to turn to?
It is necessary to support the growth of companies and to enlighten them on the different financing methods available to them. All initiatives in this direction will be beneficial for the growth of companies and their sustainability.
This op-ed by Florence Vasilescu was published by the JDN on January 20, 2020