The bond loan: What is it? | Professional Loan / Pro Credit / Corporate Credit


In France, 80% of companies are financed by banks. However, SMEs are beginning to discover the alternatives available to them, particularly in the context of bank disintermediation. In this environment, the bond loan is a source of financing that companies can claim. Appearing as a good prospect, the bond market is intensifying each year. What is it really?

The bond loan, an alternative to the bank loan?

The bond loan, an alternative to the bank loan?

In fact, rather than turning to banks, companies can now issue negotiable debt securities to investors. Especially since credit grants are limited in financial institutions. Thus, when a company (natural or legal person, local authority or international body) issues an obligation, it receives in return a certain amount of money from subscribers. This is called a bond loan. It is governed by a contract of issue. And it is this system that weakens the banks.

Reminder on the obligations

Initially reserved for mid-cap companies (ETI) and corporates, bonds can now finance the general needs of the company. They confer a nominal value (ratio between the total amount of the loan and the number of securities issued) which, during the life of the company, may move up or down.

As a result, selling before maturity may result in capital gains or losses. In general, companies that can issue bonds must be mature. They must also have a healthy financial health. And the use of funds must aim to support its development. For example, to finance his need for working capital, his research and development, etc.

The repayment terms of a bond loan

The repayment terms of a bond loan

Since the bond loan represents a debt, it provides for the repayment of an interest during the term of the loan. The rate is fixed at the time of issue. Whether fixed or variable, its repayment is usually done annually, after several years. As for the sum lent, it is repayable at maturity according to the chosen methods.

Reimbursement in fine

This repayment method consists of paying the loan at one time on the maturity date, while interest is paid annually. This is the same principle as the loan in fine classic.

Repayment by constant annuities

Each year, the investor receives the payment of interest and a share of the principal. The amount of interest, as for the classic amortising loan , will decrease as repayment progresses.

Repayment by constant amortization

The loan is repaid every year in an identical amount. The amount of depreciation is simply obtained by the ratio between the amount of the loan and the number of years of repayment.

What are the advantages of the bond loan?

What are the advantages of the bond loan?

For the company

Less dependence

By making a bond issue, a company minimizes its dependency risks with its financial partners and shareholders. Which is advantageous to support the growth of the company.

Flexible and pragmatic

The bond loan brings back to the taste of the day crowdfunding which is essentially based on a relationship of trust. Far from following complex mechanisms, it is simply necessary that the decision be taken in general meeting of the associates.

Lower costs

By subscribing to a bond loan, a company does not have to pay a deposit or guarantee. Nor is it necessary to pledge part of the professional or personal assets. In addition, the return paid to bondholders is low compared to that paid to shareholders.

For the subscriber


The granting of a bond loan allows the subscriber to have a better return on savings through attractive interest rates. In addition, it provides a fixed income known in advance.

Less risky

Compared to equities, bonds are generally less risky assets. The last due date is known in advance and the borrower agrees to pay the full amount invested over time.

Risks related to the bond loan

Risks related to the bond loan

Like any loan, the main risk of the bond loan is the repayment default of the issuer. The subscriber therefore has an interest in being attentive on the financial situation of the company and the economic context.

In addition, in the event of inflation or rising interest rates, investors will demand higher returns. Mechanically, the value of bonds already issued decreases.