isn’t it better to borrow personally?

You have chosen to create a SCI a acquisition and the management of your real estate assetsprobably to be avoided co-ownership. It must be recognized that the creation of a company is increasingly reassuring for your investors.

Whether you choose to start a company with your family, friends or spouse, the question of financing is inevitable. If you want to buy a property without having the necessary funds, nothing is lost yet. You still have to choose between borrow in your name Where is it take out a loan in the name of the SCI. Here are the things to know.

No specific installment for the loan made out to the SCI

By creating a SCI you do not benefit from preferential treatment. All the companies are in the same boat, even the SCI! In fact, there is no real estate loan dedicated exclusively to SIC.

The advantage of using a loan in the name of the SCI is confirmed if you opt for corporate tax. We remind you that if you create a SCI, you are in principle responsible income tax (IR), except option for corporation tax (IS). In fact, if you opt for the latter option, you will be able to spend the interest on the loans as an “expense”, which is very interesting.

Are you buying your property to make it your main residence or that of one of the partners? You are aware that there are loans dedicated to main residences, for example the home savings mortgage ! If you apply for a home loan in the name of a SCI, you will not be able to benefit from these loans at advantageous rates. Avoid buying a property that will be your primary residence.

Personal guarantees required

If you apply for a mortgage in the name of an SCI, the banks will ask for it guarantees on the SCI same as on every employee of the company. In fact, a mortgage guarantee, a corporate surety or even a personal surety from each partner may be required up to its shares in the company.

The idea is that if the SCI is unable to cover its debts, the SCI partners personally undertake to pay the debts to height of their participation in the share capital of the SCI. This is one of the main characteristics of this type of company. You will not escape it for the granting of mortgages.

The alternative of the shareholders’ personal loan

In the case of a real estate loan in the name of the SCI, the bank takes into account the resources of the borrower (the company), but also personal resources of each partner. This is the whole point of SCI: obtaining a loan that could not have been done by one person.

But taking out a home loan in the name of the SCI isn’t your only option. It is possible to finance the purchase of real estate for the SCI through a personal loan from the partners. Each partner then personally borrows the amount they want from a bank, and then proceeds to a cash contribution to capital of the SCI or the current account of an associate. Therefore, the SCI will have the necessary funds for the purchase of the property.

This solution is widely used by family SIC who do not wish to rent the property and collect rents.

Borrowing via the SCI is more suitable if the SCI has one rental income – Allows partners to add rental income to their personal assets.

(Photo credit: iStock)

Article written by

Author

Kenza Bennani Graduated with a Master II in business law and specialized in CSR at Paris Dauphine. He joined Legalstart to facilitate access to the law for project leaders. …
See his contributions

This text is published under the responsibility of its author. Its contents do not commit in any way the editorial staff of Les Echos Solutions.

Leave a Comment