It is a personal loan at zero rate granted to companies within the framework of a creation, a takeover or even a development of activity. The advantage of this financial aid is to help businesses obtain bank loans.
A loan of honor is a loan without interest and without guarantees granted to a creator or a buyer of a company, the interest of this financing is to facilitate him the creation, the resumption or the development of a young activity, with a refund on honor . The duration of repayment of this loan can be from 3 years to 5 years, the amount granted is on average less than 10,000 dollars. The purpose of this loan is to help a company in its development but also to facilitate it in obtaining a bank loan, through leverage.
This type of credit which requires building up a file and presenting it to the approval committee, which decides the amount to be allocated to the entrepreneur, as well as the repayment terms. The entrepreneur must present his file to professionals constituting the committee, namely business leaders, bankers but also chartered accountants. The project must therefore be detailed, to verify its sustainability but also to ensure the good faith of the contractor.
Certain creators or buyers of companies do not have equity capital to launch their activities, they must then resort to professional financing and seek the banks. The loan of honor has the peculiarity of having a leverage effect because when a company is allotted a loan of honor, the banks will generally follow the opinion of the committee of approval and will more easily grant a professional credit to the entrepreneur. The file which has been submitted and studied by the committee constitutes a first analysis and above all a first guarantee on the contractor’s repayment capacities.
Another important point, the loan of honor never constitutes the totality of the sum which the company needs, and thus obtaining this sum makes it easier to access the offers of the banks. It is in particular possible to choose its establishment for the domiciliation of the accounts of the company or for obtaining the main financing, coming to supplement the sum obtained at zero rate. Finally, the banks will grant between seven and eight times the amount obtained via the honor loan, if an entrepreneur has 10,000 dollars, the banks can lend him up to 70,000, even 80,000 dollars.