As with individuals in the real estate sector, the banking environment is favorable for businesses and should push their managers to consider financing their investments with loans.
According to the French Banking Federation (FBF), the amount of loans to SMEs increased by + 2.1% in one year, amounting to 375.8 billion USD in April 2016. And there are more than a million to finance their activity and their investments. 9 out of 10 SMEs have their investment credit requests accepted. Same situation on the side of VSEs and creators, all sectors combined.
One of the reasons for this good borrowing health comes from the fall in interest rates since 2011, despite a slight increase at the end of 2015 in overdrafts and short-term credits. Overall, all credits have dropped below 2%.
Time to renegotiate your loan
Between the refinancing rate with the ECB and the development of competition (crowdfunding and fintechs), banks are forced to have an offensive strategy on the market and are ready to make efforts with companies with a good profile.
If your financial statements look good, now is the time for your company to renegotiate its outstanding loans, especially the interest rates charged. And if you find, after calculations, that the operation is not very profitable, make competition and negotiate with another bank a repurchase of credits.
In this case, the operation consists in repaying in advance your loans contracted in your current bank, by subscribing a new credit with a competing financial institution. But here too, it is important to examine the profitability of this approach.
Advice On the interest rate side, the differential between the old and the new must be at least 0.8 point. Then, in the case of long-term borrowing, it is much more interesting to renegotiate a loan still in the first third of its repayment: this is where the amount of interest is the largest compared to the capital. Finally, if you need to take a break, you can extend the repayment tenure. A solution to consider to give a breath of air to your cash.