That we need to know about Relance Equity Loans and Relance Bonds

On 25 March 2021, the Ministry of the Economy, Finance and Productive Redress at Bercy published Decree No. 2021-318 [1] for the launch of the system of participating loans and participating bonds backed by the State, announced at the beginning of March by the Minister of the Economy, Bruno Le Maire. This scheme, aimed at SMEs and ETIs, is intended to boost investment by companies affected by the crisis linked to COVID-19.  

The Relance scheme proposed by Bercy represents 20 billion euros of loans guaranteed by the State up to 30%, which is broken down into two parts :

  • 114 billion euros of Participative Relance Loans distributed by banks;
  • 6 billion euros of Relance Bonds subscribed by investment funds (insurers, mutual insurance companies, etc.). 

In total, the 30% state guarantee amounts to 6 billion euros. All ETIs and SMEs with a turnover of 2 million euros or more in 2019 are eligible for this recovery plan.

 The objective of this system is to improve the solvency of companies so that they can invest in the growth of tomorrow. These Equity Loans are similar to quasi-equity. Companies can, without waiting for the economic situation to improve : 

  • hiring,
  • investing in the improvement of the production tool, 
  • financing in the R&D, …

How do equity loans and resale bonds work? 

For each company, the cost of the ESDP is free and will be adapted to its situation.  

The ambition is to offer companies attractive interest rates for my quasi-equity loans. They should be between 4% and 5.5% for SMEs and between 5% and 6% for ETIs. This cost includes the price of the State guarantee, i.e. 0.9% for SMEs and 1.8% for ETIs.

 In addition, to allow for long-term investments, the ESDP has a maturity of 8 years:

  • For Stimulus equity loans, an 8-year maturity with a 4-year deferral for PPSEs.
  • For Revival Bonds, a maturity of 8 years is ideal.

What are the benefits of the state-supported equity loan scheme?

For borrowing companies (SMEs and ETIs), the PPSE scheme has 3 main advantages:

  • Attractive rates for quasi-equity financing: As the cost of the PPSE scheme is free, companies should benefit from rates of between 4 and 5.5% for SMEs and 5 and 6% for SMIs for quasi-equity financing over a period of 8 years. This allows companies to strengthen their equity capital and their rating weakened by the COVID-19 crisis.  
  • A leverage effect: With the strengthening of equity and ratings, stimulus loans or bonds should be seen as financing that can be complemented by traditional bank financing that would not have been available without the ESDP.
  • A solution that protects the capital of companies: Relance bonds allow companies not to open up their capital and to retain the power of decision over their activities. This is a significant advantage for family businesses or group subsidiaries.


What is the ceiling for Equity Loan and Equity Bond?

As with the EMP, the government has defined ceilings for the Equity Recovery Loans and Recovery Bonds. Thus, companies will be able to borrow up to :

  • 12.5% of turnover 2019 for SMEs
  • 8.4% of 2019 turnover for SMEs

For innovative companies, they will be able to borrow up to the amount of their payroll in 2019 and if this is higher than the share of turnover. 

Finally, if the company was created after 1 January 2019, SMEs will be able to borrow up to the amount of their payroll in 2019, while VSEs will be able to borrow up to two thirds of the payroll in 2019.

Can equity loans be combined with EGPs?

If the sum of the EWP-EWP amounts borrowed exceeds the threshold of 25% of 2019 turnover, companies will be entitled to a reduced EWP. That is :

  • 10% for SMEs
  • 5% for SMEs

In short, by combining the PPSE and PGE, companies can borrow up to 35% of their 2019 turnover.

How to obtain a Relance equity loan or Relance bonds?

In order to benefit from a Subordinated Loan or Recovery Bonds, it is necessary to put together a file demonstrating the potential for recovery, including the following elements

  • A FIBEN rating of at least 5+.
  • A detailed analysis of the company’s capacity and potential for recovery.
  • A document presenting the investment project and its prospects
  • A long-term operational and financial model that will demonstrate the positive impact of the investments.

The borrower must reassure the financiers. In particular, the borrower must demonstrate the economic relevance of the investment project. It must also demonstrate its ability to rebound.

Good to know

Our inter-company loan platform We fundia supports you in your search for financing via bonds (simple, bullet or Revolving) with partner funds. We fundia helps SMEs and SMIs with the support of a leading company in their sector/industry (financing part of the project) to find co-financiers.

The participation of a large company in the financing of an SME or ETI in the same sector reassures co-financiers (funds, etc.) about the viability of an investment project.

[1] Decree No. 2021-318 of 25 March 2021 relating to the State guarantee provided for in Article 209 of Law No. 2020-1721 of 29 December 2020 on finance for 2021.