Financing project: which solutions for what need?
One of the first difficulties SMEs face when they want to carry out development projects is financing. Companies are regularly looking for a quick loan, whereas several solutions are available to them, apart from the bank loan, which is not always adapted and possible. Indeed, certain needs are traditionally not covered by the bank (such as intangible assets) and the company's equity capital is not always sufficient to open this possibility. Among these solutions, financing by private placement, i.e. by issuing securities, debt or capital, has long been commonly used by large groups, while smaller companies, out of ignorance, still use it too little.
Private placement financing corresponds to very different realities depending on its structuring, between equity and debt
The private financing, or, more exactly, the corporate financing by way of private placement, covers several realities depending on the structure chosen. This structuring depends on the stage of maturity of the SME's development, the structure of its balance sheet and its capacity to generate revenues (is it already profitable?) and therefore its ability to support regular repayments. Indeed, if financing by capital contribution alone ( capital increase by issuing equity or shares, otherwise known as "equity") makes it possible to strengthen the company's equity capital while completely preserving its cash flow (since the remuneration only comes through the payment of dividends, which is not necessarily provided for). However, it dilutes the founder's share of capital and is ultimately subject to a high remuneration (the "IRR"), justified by the significant risk taken by investors. It is generally used by SMEs that are still at an early stage of their development.
Conversely, pure private debt, which goes through a bond issue dry (debt securities) has the advantage of not diluting the founder, whose share of capital remains intact. Contrary to bank financing, in which the capital is repaid progressively, it is repaid « in fine » at maturity. Only the interest (« coupons ») is due during the term of the bond, so it preserves the cash flow of the SME, which is a definite advantage in the context of a development process. The interests are certainly higher than in the case of a bank financing but less expensive than in the case of an equity financing. This type of financing is therefore reserved for SMEs at a relatively advanced stage of their development, generating sufficient income to be profitable and to support the repayment of coupons during the life of the bond and the repayment of the capital at maturity.
Between these two types of « pure » securities issues (any shares or bonds) there is a whole range of « mixed » financing structures, in order to respond, in the most appropriate way, to the profile and stage of development of the SME: equity/bond mix (equity and debt securities issues), equity/OC (convertible bonds) mix, OS (dry bond)/OC (convertible bond) mix. Whatever the structure chosen, SME financing through private placement allows the SME to diversify its sources of financing, while strengthening its equity, which is a crucial asset for the company's balance sheet structure.
FirmFunding, a financing platform allowing professional investors to get in touch with the advice of SME's
Once the interest of this type of corporate financing well understood, the first difficulty SMEs face is the lack of knowledge of the actors of this type of financing and especially of the investors likely to provide them with a solution. It is to help entrepreneurs and their financial advisors meet investors that the FirmFunding financing platform exists: eligible SMEs (i.e. generating more than five million euros in turnover and profitable or about to be profitable, with a financing project of more than one million euros) put their project online and it becomes immediately visible to all professionals in this type of investment (more than 250 investors currently registered, divided between funds - management companies, and family offices). Investors can thus get in touch with the board of the SME, and continue the exchanges in a classic way (due diligence process). Unlike crowdfunding platforms, the FirmFunding financing marketplace guarantees the confidentiality of financing files posted online, which are only visible to registered investors and is reserved for financing professionals.
The projects put online are rarely fixed in terms of their structuring (between pure debt and equity), to allow open exchanges with as many investors as possible and to allow the project to evolve according to their possibilities. A review of the financing file, before it is put online, is carried out by the FirmFunding teams, so that the file is presented according to the standards to which professional investors are accustomed and only those that have a chance of arousing their interest are selected.
SMEs in all sectors of activity are likely to benefit from private debt financing
No sector or project type is in principle excluded from private debt financing, provided that the SME is at a stage of maturity and sufficient profitability. '> More than sixty projects have thus been put online, in various sectors, such as :
- real estate: real estate development, property dealers, urban heritage
- agribusiness: methanization, external growth, transition to organic farming
- IT: shareholder restructuring of a company in the IT/SaaS services sector
- audiovisual: organic growth of a company in the audiovisual production sector
- cosmetics/perfume: transmission operation (OBO)
The average amount of projects financed is four to five million euros but investors are able to finance amounts ranging from one to twenty million euros. The time required to put the project online is two months (the time needed for all potentially interested investors to contact the SME's board) and the funds can be delivered very quickly, depending on the size and complexity of the due diligence required.
The FirmFunding financing platform is the first and only platform dedicated to private placement financing, dedicated to financing professionals: If you have a financing project that cannot be addressed to banks, do not hesitate to contact our teams, via the contact form on our website.