A loan of honor is a medium-term loan granted to a person creating or taking over a business and granted without personal or real guarantees. In France, it is generally granted by associations formed for this purpose.
The loans of honor
Loans of honor are medium-term loans whose duration is generally between 2 and 5 years. They are granted to people creating or taking over a business, but not to the company itself. They are granted without personal or real guarantees, which justifies their name of “loans of honor”. Except in exceptional cases, the loans of honor do not carry interest or are said to rate 0.
Loans of honor were set up in France in the early 1980s after recognition of the difficulty faced by project holders who do not have significant personal security to access bank financing. The loan is intended to support or even replace the contribution of the project leader and to leverage additional bank financing.
The amounts of the loans of honor vary according to the needs of the carriers of projects and the politics of the associations; in general, they are between 2,000 and 30,000 euros.
Other business loan schemes are sometimes called solidarity loans; generally, they call for bonds and may have interest rates. The microcredit is a broader concept, covering a share of commercial banking; the loan of honor can be considered as a particular form of microcredit .
One of the tools of support for business creation
Since the 1980s , the French public authorities have encouraged the constitution and operation of the non-profit loan associations. Launched in 2005 as part of the social cohesion plan , the social cohesion fund is used to provide loan funds and guarantee funds.
The Caisse des Depots et Consignations (CDC), financial institution carrying missions of general interest, is one of the main financiers of most organizations providing loans of honor.
The regional councils, the general councils (departments), the communities of municipalities or agglomeration as well as the municipalities are generally involved in the financing of these organisms, alongside companies and consular organizations.
According to the CDC, the 274 loan-free funds identified in 2004 had financed 10,200 businesses (8,300 in 2003 ); these companies would have created at the beginning 21,600 jobs (16,800 in 2003). The 10,900 honor loans granted amounted to 76 million euros, accompanied by 376 million euros in additional bank overdrafts.
Organizations issuing loans of honor
The organizations issuing honor loans in France are associations.
Two networks bring together the largest number of local nonprofits: Initiative France , which brings together the Initiative platforms (230 in 2015 ) and Réseau Entreprendre .
In addition, other associations grant loans of honor in addition to other activities in favor of the creators or buyers of companies. This is the case of the Association for the right to economic initiative (Adie), France Active and the Network of Stores management .
Finally, local associations not affiliated with networks also offer loans of honor, such as Solidarité emploi Midi Pyrénées or the Association to promote the creation of business (AFACE) in the west of Ile-de-France or also the Adie(Association for the right to the Economic Initiative) established at the national level and in the DomTom since 1989.
At the end of 2004, Caisse des Dépôts identified 274 loan-free funds: 213 PFIL from the Réseau France Initiative, 26 associations belonging to Réseau Entreprendre, 12 local associations not affiliated to a network and the 23 regional directorates of Adie.
The EDEN device
Assistance for the emergence of new businesses (EDEN) is a scheme created by the French State that falls within the framework of assistance to unemployed creators or buyers of companies ( ACCRE ). Since 2004 it has been a repayable advance.
In 2008 , an agreement between the State and the Caisse des Dépôts planned to transfer the management of the EDEN system to the CDC from June 2008 for certain districts and from January 2009 for the entire territory. This agreement provides for the transformation of EDEN into a loan of honor. Since January 2009, EDEN has become New Support for the Creation and Recovery of Enterprise (NACRE). It consists of both a support system and financial support via a loan of honor.
- CDC: The loan funds of honor supported by the Caisse des Dépôts, activity report 2004, CDC, 2005. [ archive ]