French business mortgages are structured in the same way as other French Mortgages. Yet there are some very stringent additional criteria to consider.
Before granting French business mortgages, lenders will evaluate the following criteria:
- Loan to Value Ratio: The LTV ratio will be normally 50% but can be as much as 80% if the financial position of the business is very strong.
- Minimum Amount: Business mortgages are normally only available for sums above €1,000,000.
- Total Structured Indebtedness: There will be an indebtedness condition, but it will be depend on the capital structure of the business and any existing borrowing covenants.
- Profitability and Capital Adequacy: Never be granted if the business cannot prove, from its historic cashflow and profitability, that the mortgage repayments are well within its financial capability. The business must prove the funding is not required to support the capital adequacy ratio.
French Business Mortgages Are Not Risk Capital
Business mortgages can never be used in place of risk capital. French banks only consider granting business mortgages for the expansion of a significant, well established and profitable business.
They will never be granted to fund a business plan for a new or recently established business.
It is a common misconception that business mortgages are an alternative to French Home Business Mortgages because the borrower has no other income. This is not the case in France. Business mortgages are restricted to enterprises of many years’ standing with a substantial asset base and proven long-term profitability.
France offers more business structures than just companies such as SARL or SA. Indeed some clients should also consider self-employment.
Before committing to a business mortgage we recommend that you investigate the availability of French Government Grants and Assistance.