Bank guarantees: what are they?

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Do you want to take out a bank loan to complete the financing of your project? Guarantee schemes exist to facilitate your loan application. Bpifrance's creation guarantee, France Active's Equality guarantees, mutual guarantee companies, regional guarantee funds... Here's the lowdown.

What is a bank guarantee?

A guarantee is a risk cover that covers part of the bank's (or a financing organisation's) final loss in the event of borrower default, in return for a commission paid directly by the bank or the borrower.

- Benefit to the bank: a significant part of the risk associated with the financing is transferred to the guarantor, thus facilitating its decision.

- Interest for you: the guarantee thus provided generally limits the demand for personal guarantees and protects your main residence.

The Bpifrance creation guarantee

Bpifrance guarantees 50 to 60% (*) of the amount of loans granted to new entrepreneurs:

- up to 60% of the loan in the case of the creation of companies ex-nihilo by one or more natural persons (not majority shareholders or managers of existing companies), or in the case of joint intervention between Bpifrance and the Regional Council, 

- and up to 50% for other projects.

The financing concerned is that which covers tangible and intangible investments, the purchase of business assets, working capital requirements, notified overdrafts, and the issuing of guarantees on French and export markets.

(*) Are also accepted the creations by purchase of business, by transfer of shares or within the framework of an organized trade (franchise for example).

The following are excluded: the creation of companies by spinning off or transforming one or more companies, the creation of companies by taking over a business in difficulty or its assets, and simple financial restructuring operations. 

This guarantee works as follows:

- Up to €200K of loan, the bank can decide itself to grant a "creation" loan with the guarantee of Bpifrance up to 60% (*) of its amount in guarantee contract. This possibility is offered to all banks that have signed the delegation agreement proposed by Bpifrance.

- Above €200K, the bank asks the Bpifrance network, on a case-by-case basis, for a guarantee agreement with a ceiling of 50% and up to €1.5M of risk per borrower. This agreement gives rise to a notification.

The guarantees offered by France-Active

France Active intervenes to limit or exclude the use of personal guarantees in order to better protect entrepreneurs. Its guarantees are aimed at "committed entrepreneurs":

- creators of small businesses who create their own jobs and creators in fragile territories (priority urban neighbourhoods, rural areas),  

- companies with a social, territorial or environmental impact,

- social and solidarity-based enterprises (SSE).

France Active's EGALITE guarantees are dedicated to

- women who wish to create their own jobs by creating or taking over a business,

- entrepreneurs in fragile territories (neighbourhoods and rural areas),

- entrepreneurs in vulnerable areas (neighbourhoods and rural areas), entrepreneurs in vulnerable situations who wish to access employment by creating or taking over a business.

For all these entrepreneurs, France Active covers up to 80% of the amount borrowed (with a ceiling) and enables them to obtain a bank loan without taking out a personal guarantee.

Regional, departmental or sectoral guarantee funds

These funds are created at the initiative of local authorities, according to their own procedures.

To identify them, consult the national business aid database.

An example of a sectoral guarantee fund is the Fonds de garantie media pour la production (FGMP) offered by the Institut pour le financement du cinéma et des industries culturelles (IFCIC).

Mutual guarantee companies (SCM)

SCMs are credit institutions set up as cooperative companies. Their purpose is to provide a bank guarantee to their members in two ways

- by guaranteeing the borrower directly to the bank,

- by counter-guaranteeing the bank that takes the risk.

Among the SCMs, the Siagi guarantees almost all the banks and cooperates with Bpifrance, with which it has signed a delegation agreement for a co-guarantee on loans intended to finance takeovers and investments in the craft industry and local activities.

Others intervene exclusively with a specific banking network, such as Socama, which guarantees the loans of Banques Populaires, or Saccef for the BPCE group.