Personal contribution to building your business
No personal contribution - no credit! For example, banks used to oblige the entrepreneur to contribute at least 30% of the project cost (i.e., 30% of the total requirements listed in the financing plan). Today, the required minimum is almost 50%.
So, you will never be able to finance your entire business from outside sources.
To negotiate financing, banks need a project, a compelling business plan, and a minimum of personal funds. In addition to the risk-sharing philosophy, banks very rarely fund initial cash requirements, registration fees, purchase of small equipment for administrative purposes, or even initial promotions.
That is, the personal deposit acts as a financial tool to gain access to outside financing. The more money you have, the more funding you can get. Keep in mind, however, that the larger the loan, the more the repayments will affect the profitability and cash flow of your business, in an environment where financing is hard to find, it is important not to be tempted to start with less capital than you need.
In addition to the time (which will not be devoted to developing your business) that it will take to find capital, not having the cash flow to fund your investment, working capital, commercial and operational strategy can jeopardize the success of your project or, when the idea attracts investors, your ability to negotiate and/or independence.
PERSONAL INVESTMENT AND "LOVE MONEY"
If your bank account has dried up, consider "love money"! They represent funds raised by your family, friends or even generous anonymous donors.
The "love money" trend has become widespread thanks to crowdfunding platforms, where in exchange for cash, a company offers a gift to the giver.
Yes, crowdfunding can also be used to increase the "personal contribution of the project manager," or rather the company's capital in formation, in order to find additional bank financing. Think about it!
HONOR CREDIT TO ENHANCE PERSONAL CONTRIBUTION
Its purpose is to enhance the project manager's contribution potential. This famous loan is really a personal loan, meaning that only an individual can request it to bring their company and in the eyes of lending institutions enough cash to fund a 30 50% financing plan.
The honor loan is also a zero-interest loan. It is offered by local initiative platforms, national networks of various associations to finance business creators in Europe.
The amount and terms of the honor loan vary from country to country and region to region, with different rules everywhere. Some countries even offer grants for each job created by a company instead of an honor credit.
HELPING INNOVATIVE COMPANIES
There are aids specifically designed to strengthen the personal contribution potential of the creators of innovative companies, particularly to prepare them for fundraising. They can take the form of loans or grants. There are organizations that provide specific assistance, so you can also get information from the chamber of commerce or chamber of commerce to which your company belongs to find out the nature of regional assistance.
To take advantage of special aid for innovative companies, most often you need to request young innovative company status from the tax authorities. Then you must be an SME (small and medium-sized entrepreneur) directing at least 15% of your total expenses to research and development.
A MICROCREDIT WHEN YOU DON'T HAVE A PERSONAL DEPOSIT
The microcredit concerns business creators who do not meet the conditions for accessing a bank loan. If you do not have a personal deposit but you want to apply for a micro-credit, you can request it from the Association for the right of economic initiative. Note that we are looking at a structure based on the example of France. There, only projects with a funding plan of less than 10,000 euros can apply for a micro-credit for a maximum equivalent amount.
In conclusion, do not forget that access to a bank loan depends on a personal contribution of 30 to 50% of the value of your project. The goal is to provide as much equity as possible. They induce the necessary leverage effect to convince sponsors to follow you. They guarantee your ability to repay the loan and deal with contingencies that funders don't want to cover.
Gather "love money," the help of an honor loan, to achieve the necessary ratio to raise your own funds, or through a network of outside investors in your company's capital... And it will all work out, it's important to look for it! And of course, check with the chamber of commerce about the types of assistance available in your area!
Of course, in any case, don't forget to check with your chamber of commerce or chamber of commerce to find out the nature of the assistance available in your area.