Financing the development of your company: Which solution to choose?
In these post-crisis times, companies have never needed so much financing to fund the recovery. But for this, a large number of solutions are available to SMEs, with very different characteristics and requirements. Equity, quasi-equity, bank financing, or innovation financing... How to find one's way through all these possible sources of financing and how to choose the most suitable financing method ?
The different possible financing solutions
SMEs have several tools at their disposal to finance their development, which can be classified into two main categories :
- Equity financing: financing by incorporation of reserves or by capital increase (otherwise known as "equity"), which requires the company to issue shares. These funds are intended to remain in the company on a long-term basis and not to be repaid. In principle, they can only be recovered at the time of the liquidation of the company, if a profit can be made, or at the time of the (re)sale of the shares, received by the partners in exchange for their contributions. During the life of the company, the funds may be contributed by private equity funds whose typology differs according to the stage of maturity of the company ("venture capital" or "innovation capital" for the seed phase, "development capital" for companies that have reached their break-even point, or "transfer capital" allowing the acquisition of a company).
- External financing, in which we find bank financing, tax credit mechanisms allowing public financing of innovation or research (Research Tax Credit - CIR, Tax Credit for Creativity and Employment - CICE, ...), inter-company loans... and bond financing, which involves the issuance of debt securities (bonds), otherwise known as "private debt.
Between these two categories lies an intermediate layer of financing which, although not necessarily considered as equity, is classified at the top of the balance sheet above financial debt. This "quasi-equity" consists of partners' current accounts or sources of financing in the form of private debt, the repayment of which is in the hands of the borrowing SME or which is convertible into equity: subordinated debt, equity loans, mezzanine debt.
This means of financing, commonly used by large groups, has recently been brought to the forefront as the means favored by the French government for the recovery and financing of the development of small and medium-sized companies weakened by the Covid crisis (PPSE and stimulus bonds).
Indeed, the level of equity is considered a strong indicator of the company's solidity, a guarantee of the sustainability of its model. The solvency of the SME is assessed by comparing the level of equity with that of financial debt. This indicator is thus often a prerequisite to benefit from new financing, from banking players or financing organizations.
It is usual that in the development cycle of SMEs, a minimum level of equity is required, either to guarantee new financing, or to improve the company's debt capacity. The reinforcement of equity by high-end financing is therefore a real prerequisite to enable the SME to ensure its growth.
FirmFunding, the only platform that allows companies to find suitable equity financing among all existing solutions
How can you access the benefits of equity financing when you don't know the professionals (management companies, family offices) who can provide this type of financing? FirmFunding, the first and only corporate finance platform dedicated to high net worth financing, allows SMEs to put their financing project online and present it instantly to registered professional investors (+200). In this way, they can access all the private placement financing methods offered by these professionals (from straight bond to equity via the bond/equity and convertible mix...), some of which are likely to offer the "recovery bond" set up in the autumn of 2021 by the French government.
In order to meet the requirements of registered professionals, FirmFunding has defined the eligibility criteria for financing projects and companies: the amount of the project must be at least 1 million euros and the company must be a joint-stock company (SAS, SA...) or likely to be transformed into a joint-stock company, have a minimum turnover of 5 million euros and be profitable or in the process of being so (Ebitda>0).
Prior to the eventual release of the project online, FirmFunding's teams work with SMEs and their advisors to determine if their project is eligible. The process for placing funding projects online has been simplified and standardized, in order to meet investors' expectations and maximize SMEs' chances of finding the desired funding. FirmFunding's teams assist SMEs and advise them on the points to be developed and highlighted (existence of guarantees promoting the security of the project, clarification of certain sectoral specificities, highlighting of strong points, explanations of what could appear as weak points...), so as to arouse the interest of investors registered on the marketplace. Only these investors have access to the financing projects, which remain confidential, the FirmFunding platform is not open, which allows to maintain a confidentiality often desired by SMEs.
SME, you want to finance your development and diversify your sources of financing? Your project, worth more than €1 million, is at an advanced stage of maturity and your company has exceeded the break-even point, get in touch with the FirmFunding teams to study together the solutions available to you.
- By email via the contact form