SME financing in France: bank loan, equity fundraising or IPO?

What are the main sources of financing for an SME?

To finance its growth, an SME broadly has two options: borrowing, or opening up its capital to new investors. It can also reinvest its profits, but these are rarely enough to fund a major project, such as building a factory or acquiring a competitor.

Bank borrowing remains the most common route. According to the French Banking Federation, nearly 1.3 million micro-enterprises and SMEs are financed by credit, with €550bn outstanding at the end of June 2026, up 2.5% year on year. To finance an investment, an SME can use, among other things:

• an investment loan (crédit d’investissement), repaid in instalments over several years;
• leasing (crédit-bail), which lets the company use equipment without buying it: a financial institution buys the equipment and leases it to the company, which can buy it back at the end of the contract;
• loans from Bpifrance, France’s public investment bank, some of which are granted without collateral or a personal guarantee, alongside a bank loan;
• crowdfunding (financement participatif), by borrowing from individuals through an authorised platform;
• bonds, i.e. borrowing directly from investors.

To open up its capital, the company creates new shares and sells them to investors, who become shareholders. In principle, it does not have to repay the money received. In return, it now shares its capital, and with it part of the decision-making and future profits. These investors may be business angels (individuals who invest their own money in unlisted companies, often former executives who also bring their experience), private or public investment funds (such as Bpifrance’s), or individuals, through a crowdfunding platform or an IPO.

There are also intermediate solutions, known as quasi-equity (quasi-fonds propres). Legally, they are debt, but their terms bring them closer to equity: they are repaid last in the event of bankruptcy, or they can be converted into shares. Examples include blocked shareholder current accounts (comptes courants d’associés bloqués), participating loans (prêts participatifs) and convertible bonds. Because banks partly count them as equity, these instruments can make it easier to obtain a conventional loan.

These solutions often complement one another: the stronger an SME’s equity, the more easily it can borrow, mainly to finance investment. Day-to-day cash needs, linked to inventory or customer payment terms, are generally met with short-term financing, such as overdrafts or factoring (affacturage).

Bank loans: what are the pros and cons for an SME?

The main advantage of a bank loan is that it finances a project without opening up the company’s capital: the owner takes on no new shareholders. With a fixed rate, its cost is also known from the outset, and interest is deducted from the company’s taxable profit.

On the other hand, every instalment must be repaid, whatever the results, and collateral must be provided. Before lending, the bank analyses the company’s repayment capacity, i.e. the cash it generates each year to meet its repayments. This capacity determines the size of the loan.

What conditions does the bank impose?

To make sure it will be repaid even if the company runs into difficulty, the bank generally asks for collateral. It may require a pledge (nantissement) over a company asset, such as its business (fonds de commerce) or a machine. For a building, this takes the form of a mortgage (hypothèque). The bank may also rely on a Bpifrance guarantee, which covers part of the loss if the company fails to repay.

The bank may also ask the owner for a personal guarantee (caution personnelle). The owner then undertakes to repay from their own assets if the company cannot, up to an amount stated in the guarantee. The owner keeps all their shares but puts part of their personal wealth on the line.

Some loan agreements also include financial undertakings known as covenants. If, for example, the company’s debt exceeds a certain level, the bank can demand early repayment.

Lastly, the bank looks at the nature of the project. It is more willing to finance an asset it can value and resell, such as a machine or a building, than an intangible project, such as recruitment or a research programme. For this type of project, a bank loan alone is rarely enough.

How much does an investment loan cost?

The cost of a loan depends on the interest rate, its term and the company’s profile. In June 2026, the average rate on new loans to SMEs was 3.64% in France, compared with 3.96% in the eurozone (Banque de France, 2026).

Here is a worked example. An SME borrows €1m over seven years at a fixed rate of 3.64%. It repays around €13,500 a month, or around €134,300 in interest in total. Arrangement fees and the cost of collateral usually come on top.

The cost of credit is rising, however: in the third quarter of 2026, 41% of SMEs reported an increase in the cost of their loans (Banque de France, 2026). Credit nonetheless remains accessible: of the SMEs that applied for an investment loan that quarter, 96% obtained all or at least three quarters of the amount requested.

Equity fundraising: what are the pros and cons for an SME?

The main advantage of equity fundraising is that it gives the company money it will neither have to repay nor pay interest on. Investors also often bring experience and networks. On the other hand, the owner takes on new shareholders. They hold part of the capital, have a say in certain decisions and expect one day to sell their shares at a profit. A fundraising round also takes several months and involves advisory fees.

How does valuation determine dilution?

Any equity fundraising leads to dilution: by creating new shares, the company reduces the stake of existing shareholders. This applies to a round with a fund as much as to an IPO. For the owner, everything therefore hinges on valuation, i.e. the value investors place on the company when they come in. The higher the valuation, the less the owner’s stake falls for the same amount raised.

The new investors’ stake is calculated by dividing the amount raised by the company’s value after the transaction, i.e. its initial valuation plus the funds raised.

Here is a worked example. The owner holds 100% of an SME valued at €8m before the transaction. The company raises €2m. It is then worth €10m, of which €2m was contributed by investors: they hold 20% of the capital (€2m ÷ €10m) and the owner 80%. If the SME is valued at only €4m, a €2m raise gives investors one third of the capital (€2m ÷ €6m): the owner keeps only around 66.7%.

Dilution does not necessarily make the owner poorer. If the funds raised help the company grow to €20m, the owner’s 80% is worth €16m, twice as much as 100% of a company valued at €8m.

Who invests in SMEs, and at what stage?

Investors do not target the same companies or the same amounts:

• business angels: individuals, often former entrepreneurs, who invest their own money in young companies;
• venture capital funds (capital-risque), which finance young, innovative companies from which they expect very strong growth;
• growth capital funds (capital-développement), which usually take minority stakes in already profitable SMEs looking to accelerate;
• crowdfunding platforms, on which a company can offer its shares to individuals, up to €5m over twelve months.

In 2025, French private equity funds (capital-investissement) invested €36.4bn in 2,904 companies and infrastructure projects of all sizes (France Invest, 2026). Growth capital, the segment most relevant to growing SMEs, fell by 24%, however, to under €3bn.

The shareholders’ agreement: what is it and what does it cover?

A shareholders’ agreement (pacte d’actionnaires) is a contract signed between a company’s shareholders, alongside its articles of association (statuts), to organise their relationship. Unlike the articles, it is not filed with the commercial court registry (greffe) and therefore remains confidential. In a fundraising round, it sets out the new investors’ rights. It may provide, in particular, for:

• a seat on the board of directors or strategic committee for investors;
• a veto over certain decisions, such as an acquisition or new borrowing;
• a liquidation preference, which allows investors to recover their investment first if the company is sold;
• the terms of their exit: a fund invests for several years, then seeks to sell its stake, sometimes by pushing for a sale of the whole company.

In negotiations, these clauses often matter as much as the valuation.

When does an IPO become an option for an SME?

An SME can consider an IPO when it has a clear growth project, at least two years of accounts and is willing to publish information about its business on a regular basis. The stock market is not reserved for large companies: in France, Euronext Growth, Euronext Access and Lise are markets dedicated to SMEs, with rules adapted to their size.

Compared with a private fundraising round, a listing changes three things for the owner:

• investors are numerous: no single one carries decisive weight, and the owner can remain the majority shareholder;
• shares have a market price and can be sold: shareholders, including employees or customers who have invested, have an exit route without waiting for the company to be sold;
• the company makes a long-term commitment: it must publish its accounts and any information likely to affect its share price.

A listing on an SME growth market also helps attract individual investors: those who subscribe to the IPO may be eligible for the IR-PME income tax reduction, provided the company meets the scheme’s conditions.

How much does an IPO cost?

The cost of an IPO is generally between 5% and 10% of the amount raised, and can exceed 10% for very small deals (Euronext Brussels and Deloitte Legal, 2020). For a €10m raise, this means between €500,000 and €1m.

These costs fall in relative terms as the deal grows: proportionally, they weigh more heavily on a small deal than on a large one. They mainly cover the fees of the advisers who prepare the transaction: the bank or firm placing the shares, lawyers, statutory auditors (commissaires aux comptes) and, on Euronext Growth, a listing sponsor. According to the same guide, the fees paid to Euronext to admit the shares account for only a small share, around 0.4% of the funds raised.

On Lise, individual investors subscribe directly on the platform, without going through a bank or broker. For the company, the transaction costs a fixed fee of €30,000 excl. VAT plus 7% of the amount raised, including 5% for placing the shares (Lise, 2026). For a €2m raise, this comes to €170,000 excl. VAT, or 8.5% of the amount raised, to which the fees of the company’s own advisers may be added. Once listed, the company pays Lise an annual fee of €30,000 excl. VAT.

Since 5 June 2026, a public offering of less than €12m over twelve months no longer requires a prospectus approved by the Autorité des marchés financiers (AMF), France’s financial markets regulator. A shorter information document (document d’information) is enough, which makes preparation lighter and cheaper.

Once listed, the company bears recurring costs: statutory auditors, financial communication, annual market fees and the time the management team spends keeping shareholders informed.

What are the conditions for going public?

Admission requirements vary from one market to another:

• on Euronext Growth: two years of audited accounts, at least €2.5m of shares offered to the public and support from a listing sponsor;
• on Euronext Access: two years of accounts with no audit requirement, no minimum amount offered to the public, and a listing sponsor for admission;
• on Lise: in principle, audited or pro forma accounts for the last two financial years, no minimum amount offered to the public and a market capitalisation below €500m.

None of these markets is a regulated market within the meaning of EU law, unlike Euronext’s main market. They are nonetheless supervised: each sets its own admission requirements and disclosure obligations for listed companies, under AMF supervision, and EU market abuse rules apply.

These obligations are simply lighter. Disclosure comes at a real cost: accounts must be audited, reports produced on fixed dates and the finance team mobilised, and lawyers and financial communication advisers often have to be paid. These costs weigh proportionally far more heavily on an SME than on a large group.

For example, a company listed on these markets is not required to present its accounts under International Financial Reporting Standards (IFRS), which are mandatory on a regulated market and often require specialist support to implement.

Bank loan, fundraising or IPO: how to choose?

The choice depends on the project, the company’s situation and what the owner is prepared to put on the line: their personal assets if they guarantee the bank loan, or a share of their company if they open up its capital.

A bank loan is well suited to a project with predictable revenues based on an identifiable asset, such as a machine or a building. It leaves the capital intact but weighs on cash flow for its entire term.

Private fundraising is better suited to a more uncertain or intangible project, such as launching a new business line. It also brings investors’ experience and networks, at the cost of shared governance and an exit to organise.

Crowdfunding makes it possible to raise more modest amounts from individuals, up to €5m over twelve months, as equity or as loans.

An IPO is for established SMEs with a specific growth project and a structured organisation. It allows them to raise funds from a large number of investors without the owner losing control, and gives shareholders the ability to sell their shares.

Can an SME go public on Lise?

Yes. Lise (Lightning Stock Exchange) is a French stock exchange dedicated to SMEs and mid-sized companies (ETI). It is an investment firm authorised by the ACPR, the French banking supervisor, and supervised by the AMF. It operates a multilateral trading facility (MTF) registered as an SME growth market. Lise is not a regulated market, but that does not mean it operates without rules: admission requirements and companies’ disclosure obligations are set out in its rulebook, under AMF supervision.

For a raise below €12m, the company publishes an information document approved by Lise. Once listed, it publishes an annual report within six months of its financial year-end and a half-year report within four months of the end of its first half.

On Lise, shares are tokenised: each share takes the form of a digital token recorded on a blockchain. They are genuine shares, carrying the same rights as conventional shares, and can be traded 24 hours a day, 7 days a week.

The first IPO on Lise was that of ST Group, a Toulouse-based SME that manufactures composite parts for the aerospace, defence and space industries. In April 2026, it raised €2.07m by issuing 113,525 new shares at €18.25 each. Individual investors accounted for 97% of subscribers (Lise, 2026).

Investing in SME shares involves risks, including the risk of losing all or part of the capital invested and liquidity risk.

FAQ

What can a company do if the bank refuses a loan?

There are several options. The owner can first approach other banks or ask their own bank to use a Bpifrance guarantee. If the refusals continue, they can refer the matter to the Banque de France’s credit mediation service (médiation du crédit), free of charge and online. The mediator contacts the company within 48 hours and notifies its banks, which then have five working days to review their position. If no agreement is reached, the mediator brings the company and its financial partners together to look for a solution.

How long does it take to obtain financing?

It depends on the option. For a loan, French banks have committed to responding within 15 working days once the application is complete. Raising funds from an investment fund usually takes several months, between finding investors, negotiating and due diligence. An IPO also requires several months of preparation.

Can a company raise funds without losing control?

Yes, provided the owner remains the majority shareholder and the new investors’ rights are clearly defined. The owner can offer only a minority stake or issue preference shares (actions de préférence), which may, for example, carry a higher dividend in exchange for no voting rights. Quasi-equity, such as convertible bonds, also strengthens the balance sheet without diluting the capital until it is converted into shares.

What public funding is available for SMEs in France?

Several forms, mainly for innovation and investment. Bpifrance offers loans, guarantees and, for innovative projects, grants and repayable advances. French regions (régions) also provide loans and investment aid, and the French State funds projects through calls for projects, such as those under the France 2030 plan.

Can a French SAS go public?

In principle, no, as at the date of publication of this article. The French Commercial Code prohibits a société par actions simplifiée (SAS) from offering its shares to the public or having them admitted to trading on a regulated market, except in limited cases such as crowdfunding. An SAS that wants to go public therefore first converts into a société anonyme (SA).

Can employees become shareholders in their SME?

Yes. An SME can open its capital to employees, for example through a company savings plan (plan d’épargne d’entreprise, PEE), free share awards (attribution gratuite d’actions) or, subject to conditions, founder share warrants (bons de souscription de parts de créateur d’entreprise, BSPCE). According to the AMF, an IPO is often the occasion to do so.

Sources

• French Banking Federation, based on Banque de France data: Le financement des entreprises, août 2026 (nearly 1.3 million micro-enterprises and SMEs financed by credit, an undated figure used since 2021; €550bn of loans to SMEs at the end of June 2026; average rate on new loans to SMEs of 3.64% in France and 3.96% in the eurozone in June 2026; in French, 2026)
• Banque de France: Accès des entreprises au crédit, troisième trimestre 2026 (41% of SMEs reporting a higher cost of credit; 96% of SMEs applying for an investment loan obtained all or more than 75% of it; in French, 2026)
• Bpifrance, via les-aides.fr: Prêt Croissance (loan with no collateral on company assets or the owner’s personal assets, combined with a bank loan; in French)
• Banque de France: Fiche 504, la garantie Bpifrance (Bpifrance guarantee covering 40% to 70% of bank financing for SME development; in French, 2024)
• Banque de France: Fiche 411, le prêt participatif (treated as equity, subordinated last-ranking debt; in French, 2024)
• Bpifrance Création: Prêt participatif (financing between a loan and equity, last-ranking claim; in French)
• Légifrance: Code monétaire et financier, article L. 313-14 (participating loans treated as equity; in French)
• CMS Francis Lefebvre: Réforme des sûretés et cautionnement (Article 2297 of the Civil Code: guarantee capped at an amount stated in the deed; 2021)
• France Invest and Grant Thornton: Capital-investissement français en 2025, des indicateurs contrastés mais un marché toujours dynamique (€36.4bn invested in 2,904 companies and infrastructure projects; in French, 2026)
• CFNews: Non-coté, les sorties se font attendre (growth capital down 24% to under €3bn, based on France Invest and Grant Thornton; in French, 2026)
• AMF: Publication du règlement européen relatif au financement participatif, dates clés et grandes lignes (€5m cap per project owner over twelve months; in French, 2020)
• AMF: Le Listing Act (prospectus exemption threshold raised to €12m on 5 June 2026; in French, 2026)
• Euronext Brussels and Deloitte Legal: IPO & Listing Guide (IPO costs generally between 5% and 10% of funds raised, decreasing with deal size, Euronext fees of around 0.4% of funds raised; in French, 2020)
• Euronext: Choisir son marché (admission requirements on Euronext Growth and Euronext Access, listing sponsor; in French)
• AMF: Décision d’approbation des modifications de règles du système multilatéral de négociation LISE (Lise registered as an SME growth market; in French, 2026)
• Lise: Règles de fonctionnement (audited or pro forma accounts for two financial years, information document approved by Lise below €12m, annual report within six months and half-year report within four months; in French, 2026)
• ESMA: DLT Pilot Regime (market capitalisation below €500m)
• Lise: Listing (direct subscription on the platform, information document below €12m)
• Finyear (Lise press release): Lise clôture la première IPO au monde sur infrastructure nativement tokenisée, ST Group lève 2,07 M€ (€2.07m, 113,525 new shares at €18.25, 97% of subscribers were individuals; in French, 2026)
• Tout sur mes finances (interview with Mark Kepeneghian, CEO of Lise): Lise, des titres tokénisés négociables 24 heures sur 24, 7 jours sur 7 (same rights as a conventional share, continuous trading; in French, 2026)
• Banque de France: La médiation du crédit (free and confidential service, online referral, contact within 48 hours; in French)
• Banque de France: Accord de place sur la médiation du crédit (banks have five working days to review their position; in French, 2024)
• French Ministry of the Economy: Difficultés de financement, la médiation du crédit aux entreprises (banks expected to respond within 15 working days; in French, 2025)
• Mes aides publiques (Infogreffe): Prêts aux entreprises (Bpifrance loans, including those under France 2030; in French)
• Mes aides publiques (Infogreffe): Bons de souscription de parts de créateur d’entreprise (BSPCE) (joint-stock companies under 15 years old, market capitalisation below €150m if listed; in French)
• Légifrance: Code de commerce, dispositions sur les sociétés par actions simplifiées (Article L. 227-2: ban on public offerings and admission to a regulated market, with exceptions; in French)
• AMF: Position-recommandation DOC-2015-02 sur les introductions en Bourse (employee share ownership at the time of an IPO; in French, 2015)
• Lise: Politique en matière de transparence tarifaire (fixed fee of €30,000 excl. VAT, 2% variable fee and 5% placement fee on the amount raised, annual admission fee of €30,000 excl. VAT; version approved by the board on 9 March 2026; in French, 2026)