The loan of honor is a credit that is granted on the good faith of the applicant. It allows those who are banned from the traditional banking circuit to receive funding.
The loan of honor is only based on trust.
These credits are not donations, but are very often associated with existing social assistance in France. The loan of honor is a loan that is granted to the person, not to the company. You engage your person, your honor. It is a loan that does not incur any guarantee on your part. These are credits to repay as a rule between 2 to 5 years. This type of credit is granted most often by associations. Associations that want to develop their region, for example. If you have a concrete project in a region, find out from local authorities if there is no help for starting a business.
Loans are generally from 3000 to 15000 euros, on average 7500, at an interest rate generally unbeatable: 0%. So these are zero interest loans in general : you bring your initiative, your work, your business in the making that will help develop an economic activity in a sometimes disaster area for example, and they help you, by financing you. As much to say to you that it will be necessary to have a project which holds the road.
We will study in this article the three main forms of loans of honor, which each respond to a specific need of money.
All about CAF loans microcredit from the ADIE (Association for the right to economic initiative), which allow project promoters to obtain financing. This type of credit is very restrictive, and practices interest rates identical to conventional banks, with the advantage of being accessible to those excluded from the banking circuit: long-term unemployed, bank of France, RSA beneficiaries.
The loan of honor is made to the person, on a case by case basis, project by project. You agree on your honor to repay what we lend you. There is no interest in the majority of cases, it is a real help! ADIE only lends to businesses, usually very small, for example in the craft industry. The sums range from 500 to 5500 euros, and come in addition to the contribution of the entrepreneur.
Many associations, mostly local, offer loans of honor, which carries out activities of general interest, and also assisted by Regional Councils and other local authorities. Their interest is simple: to boost employment and business in their geographical area. They have sums dedicated to local investment, and are waiting for realistic project leaders to invest. The loan of honor is addressed to the project holders who need a credit, but have no guarantee to provide to the banks which allows them to obtain the financing.
Without personal contribution, the banks automatically become chilly!
The main attraction of the loan of honor is its leverage: banks, if you have obtained a loan of honor, lend you much more easily. Of course, you need to have a solid project, in the interest of your region. Honors loans are different from microcredit and other solidarity credits, because you are not asked to have people who stand surety for you, you are not asked guarantors.
Funded projects involve the creation or development of start-ups (less than 3 years old) that create wealth in the region. According to the lending association, the terms for obtaining credit will change. An association will lend to those who want to develop an agricultural activity in the region, another will lend to projects that have a technological vocation, still others will make zero-rate loans to companies with a social vocation.
The counterpart required by the lending associations is in general, the acceptance of the assistance of technical follow-up of the activity. Through a ” sponsorship “, the association will control what you do, and help you. This is in my opinion a positive point: it is good to have a guide, help to support us in the administrative, is not it? Especially that the sponsor will make you benefit from his experience and his fabric of relations to make you succeed. The companies financed by a loan of honor are mostly happy: after 3 years, more than 80% of the companies still exist, proof of their durability and the solidity of the initial project.
Credit of 3000 to 30 000 euros for his company
The amount of the loans of honor vary, for the majority, between 3000 and 15000 euros, being able to go in exceptional cases to 30000 euros. On average, it is rather 7500 euros that are granted, for the start-up expenses and working capital of the new company. This is a large amount of money at the beginning of any activity, and in the vast majority of cases, without interest. It is always advisable to have a good record in concrete and to go systematically to see the lending associations of his region. There is no obligation to contract a conventional bank loan in addition to the loan of honor, but the loans of honor are intended to facilitate the bank loan. The files are credited by the expertise of the associations, who study the projects in a global way.
Credits are generally medium-term, repayable between 3 and 6 years.
Loan of honor for SMEs
The Entreprendre network, with its 35 associations, specializes in helping creators of future SMEs. The network offers four types of free help:
- Project evaluation, feasibility and potential of the future company
- The loan of honor proper: no interest or guarantees, the sums of money range from 15,000 to 45,000 euros.
- Integration in the local economic fabric: to have commercial relations with the other companies of the region.
- A two-year accompaniment, made by other entrepreneurs.
Credit to start a business in Paris: Paris Initiatives Entreprises
For Parisians, there are several associations that finance entrepreneurs, with a loan of honor. This is the case of Paris Initiatives Entreprises, which I take here as an example. Each region has its own association, with its specificities, here, the creation of a company in Paris intramural.
The grants are awarded to two different profiles: the creators of very small companies (less than 20 employees), or the projects involved in the social and solidarity economy. A sponsor is assigned to each project leader, which will allow him to have assistance, moral support and especially a good address book.
How to pay for your studies without the help of your parents
- Employee’s credit
- Social microcredit
Only trust in the person counts, for a loan of honor.
The loan of honor, based solely on the trust that the lender gives to the business creation project, is the best way to start when there is no support in the professional environment in which one wants to evolve. The permanent assistance, all along the project, is an extraordinary support for the young companies. For those who do not have money, or guarantees to give to the bankers, there is a way to get a loan anyway, to be able to finance his projects. This is called the “loan of honor”.
Everyone knows that it is practically impossible to obtain credit, if you do not have any guarantees or personal contribution: that is why in the early 80s, various associations began to grant loans, substituting banks, who do not want to make credit too risky. Several forms of loans of honor are proposed in France, we studied the three main ones: the loan of honor for the creation and the development of the company, the loan of honor of the CAF, and the loan of honor student. Other loans of honor intervene, when it is necessary to support a person in situation of financial distress.