When you apply for a professional bank loan , the bank will analyze the file that you submit to it. To determine its quality and level of risk, it will in particular calculate various ratios and financial indicators. In the end, the results will allow him to issue an opinion on your financing (agreement or refusal) and to define the characteristics of your loan (amount and interest rate in particular). Anticipate this analysis by finding out what criteria banks use to grant professional financing .
The banks will study your self-financing capacity
CAF, what is it?
Self -financing capacity is an important element of your project. It makes it possible to determine the level of resources that your activity will generate thanks to its operation and the methods of financing its activities. It represents an index of profitability .
From a banking point of view, the CAF is used to calculate a company ‘s repayment capacity and therefore, indirectly, its borrowing capacity.
Your company ‘s borrowing capacity can be calculated as follows:
Bank indebtedness = Self-financing capacity * Number of years of repayment
Several methods exist to calculate a CAF. This data corresponds to the difference between cashable income and cashable expenses. Starting from the net result, it is necessary:
To add the allowances for depreciation and provisions and the net book values of assets sold,
And to subtract the reversals of provisions and depreciation, the share of subsidy transferred to the income statement and the proceeds from the sale of assets.
How will your file be judged by the bank?
Good if the number of years is less than or equal to 3 ,
Medium if it is between 3 and 10 ,
And risky if it extends beyond 10 years .
These figures can, of course, vary depending on the nature of your project. For example, for a real estate project, a bank will generally encounter no obstacles in financing you over 15 or even 20 years. To protect itself against the risk of non-payment, it will constitute, in return, bank guarantees (mortgage on the property in particular).
Banks will analyze the amount of your equity
Your company’s ability to repay its debts is not the only variable studied by your bank. It also looks at other indicators such as your overall debt ratio .
This variable measures the extent of your professional debt in relation to your own funds . The calculation of this rate has several interests for a bank.
Assess the extent of your personal commitment (the more equity you provide, the more you will show that you believe in the chances of your project succeeding);
And measure the degree of solvency of your company. (Equity represents the pledge of creditors and the banks will end up appropriating it in the event of failure of the project).
How to calculate the debt ratio of your company?
The professional debt ratio of a company is calculated as follows:
Debt ratio = Financial debt / Equity
Financial debts include not only the amount you request as a bank loan but also:
The current accounts of non-blocked associates,
And all the other debts you incur
How high should your company’s debt ratio be?
In the “excellent” cases, the debt ratio does not exceed 30%. The “average” files, meanwhile, show a rate of between 30 and 75% . Finally, the risky files exceed 75% .
The banks will take note of your gross operating surplus
This is the last criterion taken into account by banks to grant financing. However, it should be borne in mind that it is generally not decisive. The first two criteria (presented below) largely prevail.
With your EBITDA, banks calculate a financial interest coverage ratio:
Interest coverage ratio = EBITDA / Financial interest
Your file will be classified as “good” if the result is greater than 8, “average” if it is between 2 and 8 and “risky” if it is less than 2.
The criteria presented here are not the only elements that will be analyzed by your bank. To succeed in your application for professional financing , you will also need to